Question: This is my question Problem 1 (25 pts) Jill has preferences for perfect substitutes represented by the utility function u(g, h) = 2(g + h)

This is my question

This is my question Problem 1 (25 pts) Jill has preferences for

Problem 1 (25 pts) Jill has preferences for perfect substitutes represented by the utility function u(g, h) = 2(g + h) where g and h are the quantities of the two goods, good G and good H, that she consumes. Suppose the price of good G is pg = $3. (a) Find Jill's demand functions for goods G and H for any 1);, 0. (b) Suppose m = $60 and ph = $1. Find Jill's optimal consumption bundle. Put h on the vertical axis and plot her budget line and her indifference curve through the optimal bundle. (c) Suppose, starting from part (b), the government taxes good H and its price increases to p3, = $2. How much income would Jill need to afford her optimal bundle from part (b) at the new prices? Find the income and substitution effects of the good H price change on the quantities consumed of good G and good H. Is Jill worse off or better off after the price change? Explain

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