Question: Suppose that, for a particular consumer, the utility from consuming goods x and y is modeled with U(x,y) = xy + x, so MUx =

Suppose that, for a particular consumer, the utility from consuming goods x and y is modeled with U(x,y) = xy + x, so MUx = y + 1 and MUy = x. Assume the consumer's income is I = 10. a) Calculate the utility-maximizing bundle when Px = 1 and Py = 1. b) Find the income and substitution effects of an increase in the price of good x to Px = 2. 2 c) Find the compensating variation and equivalent variation of the price change in part (b).

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