Question: explain in simple terms Example 2 (Cobb-Douglas) Suppose that Elliot's income is 10 and that his utility function is u(x1, X2) = X1 + 2x2.

explain in simple terms

Example 2 (Cobb-Douglas) Suppose that Elliot's income is 10 and that his utility function is u(x1, X2) = X1 + 2\\x2. The prices are given by p1 = 2 and p2 = 1. p1 then falls to 1. Decompose the price effect into its substitution and income effects using the Hicks-Allen decomposition

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