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

We can solve this problem by analyzing the Slutsky equation (without Hicksian adjustment) and…

Answered: Ceren's preference relation is…

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 6P

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