Arafia consumes two goods X and Y. Her utility function is given by U(x, y) = x"y. The price of Good X used to be $5 per unit but has recently increased to $10 per unit. The price of Good Y has remained unchanged $10 per unit. Arafia has $500 to spend. Suppose the government wants to give Arafia enough money so that she can still buy the previous consumption bundle that she was buying before the increase in Px. Which of the following statements is CORRECT? O The government needs to give Arafia approx. $750 or an additional $250. O The government needs to give Arafia approx. $650 or an additional $150. The government needs to give Arafia approx. $541.4 or an additional $41.4. O The government needs to give Arafia approx. $550 or an additional $50.

Arafia consumes two goods X and Y. Her utility function is given by U(x, y) = x"y. The price of Good X used to be $5 per unit but has recently increased to $10 per unit. The price of Good Y has remained unchanged $10 per unit. Arafia has $500 to spend. Suppose the government wants to give Arafia enough money so that she can still buy the previous consumption bundle that she was buying before the increase in Px. Which of the following statements is CORRECT? O The government needs to give Arafia approx. $750 or an additional $250. O The government needs to give Arafia approx. $650 or an additional $150. The government needs to give Arafia approx. $541.4 or an additional $41.4. O The government needs to give Arafia approx. $550 or an additional $50.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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