Question: Bob s utility function was given as U = ( XY ) 2 where X and Y are the quantities of the two different commodities.

Bobs utility function was given as U =(XY)2 where X and Y are the quantities of the two different commodities. We derived his demand functions as; X = I /(2PX) Y = I /(2PY) Bob initially faces prices $10 for good X and $20 for good Y and earns $240 each week. Suppose that price of X then falls to $6. a. Calculate the SE and IE of the price change. b. Calculate the compensating variation of the price change. c. Calculate the equivalent variation of the price change.

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