Question: Marvin consumes two goods, good 1 and good 2. Quantity of good 1 and good 2 are q 1 and q 2 respectively. The prices

Marvin consumes two goods, good 1 and good 2. Quantity of good 1 and good 2 are q1 and q2 respectively. The prices of good 1 and good 2 are p1 and p2 respectively. Marvin's utility function is

U=q10.75 q20.25

On day 1, his income is Y=$300, and he faces price of =$4 and =$2. Then, on day 2, increases from $4 to $5 while his income and remain the same.

  1. How much more income would Marvin need if he wants to achieve day 1's maximum utility level but under day 2's prices?
  2. From day 1 to day 2, Marvin's consumer surplus

A. Increased

B. Decreased by $______.

3. How much less income would Marvin need if he wants to achieve day 2's maximum utility level but under day 1's prices? Marvin would need $_____less income.

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