John has a utility function for chocolates (x) and candy (y) which is represented by u(x,y)=xy. Suppose that his income is 1000 TL and the prices of the goods are Px=10 TL and Py =5 TL. Now suppose that the price of chocolate decreases to Px=8 TL. Find the substitution effect and income effect, on chocolate, of this price change.
John has a utility function for chocolates (x) and candy (y) which is represented by u(x,y)=xy. Suppose that his income is 1000 TL and the prices of the goods are Px=10 TL and Py =5 TL. Now suppose that the price of chocolate decreases to Px=8 TL. Find the substitution effect and income effect, on chocolate, of this price change.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 13SQ
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John has a utility function for chocolates (x) and candy (y) which is represented by u(x,y)=xy. Suppose that his income is 1000 TL and the prices of the goods are Px=10 TL and Py =5 TL. Now suppose that the price of chocolate decreases to Px=8 TL. Find the substitution effect and income effect, on chocolate, of this price change.
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