Following U(x, y) = xo-3 YOS is the utility function of a person who consumes two goods

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Following U(x, y) = xo-3 YOS is the utility function of a person who consumes two goods in quantities x and y, respectively. The price of x is PX = 5 and the price of y is Py = 8 and person's income is m 160.Find the optimal consumption choice of this person.

a) Assume that the price of x falls to P = 4. Calculate the person's demand for X at the new price. Also calculate the compensated income, m².

b) Decompose the change in demand for good X into a substitution and an income effect.

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Managerial Accounting An Introduction to Concepts Methods and Uses

ISBN: 978-0324639766

10th Edition

Authors: Michael W. Maher, Clyde P. Stickney, Roman L. Weil

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Posted Date: Nov 18, 2022 02:16 AM

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Following U(x, y) = xo-3 YOS is the utility function of a person who consumes two goods

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ANSWER We know that the optimal consumption choice is the one that maximizes utility so we need to f... View the full answer

Managerial Accounting An Introduction to Concepts Methods and Uses

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