Floyd's utility function is given by U(X,Y)= 2XY. MUx=2Y and MUy=2X. The price of good X is Px=2, while the price of good Y is Py = 1. Floyd's income is 1,000. Which of the following is true given that the price of good X falls to 1? The substitution effect for good X results in an increase of X consumption by about 1,043 units and a decrease in Y consumption by about 14 units. The substitution effect for good X results in X consumption of about 250 units. The substitution effect for good X results in X consumption of about 500 units. The substitution effect for good X results in an increase of X consumption by about 250 units and no change in Y consumption.

Floyd's utility function is given by U(X,Y)= 2XY. MUx=2Y and MUy=2X. The price of good X is Px=2, while the price of good Y is Py = 1. Floyd's income is 1,000. Which of the following is true given that the price of good X falls to 1? The substitution effect for good X results in an increase of X consumption by about 1,043 units and a decrease in Y consumption by about 14 units. The substitution effect for good X results in X consumption of about 250 units. The substitution effect for good X results in X consumption of about 500 units. The substitution effect for good X results in an increase of X consumption by about 250 units and no change in Y consumption.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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