Paul is a purchaser of mangoes (x) and oranges (x). His Utility function over the two...
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Paul is a purchaser of mangoes (x₁) and oranges (x₂). His Utility function over the two goods can be expressed as U(x₁, x₂) = x₁¹²x₂¹ Paul faces a price of mangoes of $2 and a price of oranges 1/2 1/2 of $1 and he has an income of $12. If the price of mangoes decreases to $1, what will be the substitution effect, income effect, and total effect on mangoes? What about all the effects on oranges? Paul is a purchaser of mangoes (x₁) and oranges (x₂). His Utility function over the two goods can be expressed as U(x₁, x₂) = x₁¹²x₂¹ Paul faces a price of mangoes of $2 and a price of oranges 1/2 1/2 of $1 and he has an income of $12. If the price of mangoes decreases to $1, what will be the substitution effect, income effect, and total effect on mangoes? What about all the effects on oranges?
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ANSWER Question a the substitution effect is 175 units the income effect i... View the full answer
Related Book For
Financial accounting
ISBN: 978-0136108863
8th Edition
Authors: Walter T. Harrison, Charles T. Horngren, William Bill Thomas
Posted Date:
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