Ceren's preference relation is represented by a utility function u(X1, X2) = X1^1/3 X2^1/3 for any nonnegative consumption bundle (x1, x2). The price of good 1 is $1 and the price of good 2 is $2 and her income is $15. If the price of good 1 increases to $5 while the price of good 2 and her income remains constant, the Slutsky income effect (not Hicksian) on Ceren's good 1 consumption reduces her consumption by what? and the total (absolute) price effect is what? (Slutsky decomposition not Hicksian) (a) 10/3, 5 (b) 4/3, 4 (c) 7.5/3, 2 (d) 8/3, 2.5

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter10: Consumer Choice Theory
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Ceren's preference relation is represented by a utility function u(X1, X2) = X1^1/3 X2^1/3 for any nonnegative
consumption bundle (x1, x2). The price of good 1 is $1 and the price of good 2 is $2 and her income is $15. If the price
of good 1 increases to $5 while the price of good 2 and her income remains constant, the Slutsky income effect (not
Hicksian) on Ceren's good 1 consumption reduces her consumption by what? and the total (absolute) price effect is
what? (Slutsky decomposition not Hicksian) (a) 10/3, 5 (b) 4/3, 4 (c) 7.5/3, 2 (d) 8/3, 2.5
Transcribed Image Text:Ceren's preference relation is represented by a utility function u(X1, X2) = X1^1/3 X2^1/3 for any nonnegative consumption bundle (x1, x2). The price of good 1 is $1 and the price of good 2 is $2 and her income is $15. If the price of good 1 increases to $5 while the price of good 2 and her income remains constant, the Slutsky income effect (not Hicksian) on Ceren's good 1 consumption reduces her consumption by what? and the total (absolute) price effect is what? (Slutsky decomposition not Hicksian) (a) 10/3, 5 (b) 4/3, 4 (c) 7.5/3, 2 (d) 8/3, 2.5
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