Question: Suppose the utility is given by U = square root x + square root y (where x and y denote quantities, the prices of x

Suppose the utility is given by U = square root x + square root y (where x and y denote quantities, the prices of x and y are P_x=P_y=1 and income I=12.

The optimal bundle has a quantity of 6 at x.

The optimal bundle has a quantity of 6 at y.

Good x undergoes a price shock where Px=2.

Consider the optimal bundle after applying the substitution effect, but before the income effect:

The optimal bundle after the substitution effect has what quantity of x?

The optimal bundle after the substitution effect has what quantity of y?

*note substitution effect is always negative

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