Question: I only need PART (2). EXERCISE 3 Consider a consumer who consumes two goods and has utility function u(x1,:c2) = x2 + '/.'L'1. The price

I only need PART (2).

EXERCISE 3 Consider a consumer who consumes two goods and has utility function u(x1,:c2) = x2 + '/.'L'1. The price of good 2 is 1, the price of good 1 is p, and income is m. (1) Show that a) both goods are normal, b) good 1 is an ordinary good, 0) good 2 is a gross substitute for good 1. (2) Start with m = 10 and p = 1.5, and suppose that the price of good 1 increases by 25%. Compute the substitution and the income effect

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