Problem 1: suppose Bob's demand function for widgets is given by: x1*= m/ p1 + p2 Use that demand function to answer questions A-D

Bob has $120 to spend on widgets and gadgets (widgets cost p, = $2 each and gadgets cost P2 = $4 each). ABCF a) Compute the 'own-price' effect of an increase in p1 to pi = $8. b) Let p1 remain at $2. Compute the income effect (the change in xi due to an increase in income) for an increase in m from $120 to $300. c) Let p1 remain at $2. Compute the 'cross-price' effect of an increase in p2 to p2 = $10 on Bob's demand for widgets. d) Given Bob's demand function, find Bob's inverse demand function