2) Leyla has the utility function U(x₁,x₂) = 4x₁²x₂³. (x₁: nuts, x₂: berries). a) If Leyla has an income of 50 liras, the price of nuts is 2 and the price of berries is 1 liras, what is the ordinary demand of Leyla? b) Assume the prices change, so that nuts cost 1 and berries cost 3 liras. What is the new ordinary demand? c) In the change calculated in part (b), what is the pure substitution effect? d) In the change calculated in part (b), what is the income effect?

2) Leyla has the utility function U(x₁,x₂) = 4x₁²x₂³. (x₁: nuts, x₂: berries). a) If Leyla has an income of 50 liras, the price of nuts is 2 and the price of berries is 1 liras, what is the ordinary demand of Leyla? b) Assume the prices change, so that nuts cost 1 and berries cost 3 liras. What is the new ordinary demand? c) In the change calculated in part (b), what is the pure substitution effect? d) In the change calculated in part (b), what is the income effect?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

would be glad if u can help

2) Leyla has the utility function U(x1,x2) = 4xı*x:. (x:: nuts, x:: berries).
a) If Leyla has an income of 50 liras, the price of nuts is 2 and the price of
berries is 1 liras, what is the ordinary demand of Leyla?
b) Assume the prices change, so that nuts cost 1 and berries cost 3 liras. What
is the new ordinary demand?
c) In the change calculated in part (b), what is the pure substitution effect?
d) In the change calculated in part (b), what is the income effect?

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