Robin consumes two goods X and Y. His utility function is given by U(x, y) = x*y. The price of Good X used to be $10 per unit but has recently increased to $20 per unit due to the good being taxed. The price of Good Y has remained unchanged at $20 per unit. Robin has $2000 to spend. Suppose the government wants to give Robin enough money so that he can still consume the amount of X and Y that he was consuming before the price change. Which of the following statements is CORRECT? O At the earlier prices, Robin would consume 75 units of X and 100 units of Y. This bundle now costs $2750. But if the government gave Robin an additional $750 then Robin would prefer to consume 80 units each of X and Y. O At the earlier prices, Robin would consume 50 units of X and 100 units of Y. This bundle now costs $2500. So, the government needs to give Robin an additional $500 to afford the original bundle. But if the government gave Robin an additional $200 then Alex would prefer to consume 100 units each of X and Y. O At the earlier prices, Robin would consume 200 units of X and 50 units of Y. This bundle now costs $3000. So, the government needs to give Robin an additional $1000 to afford the original bundle. But if the government

Robin consumes two goods X and Y. His utility function is given by U(x, y) = x*y. The price of Good X used to be $10 per unit but has recently increased to $20 per unit due to the good being taxed. The price of Good Y has remained unchanged at $20 per unit. Robin has $2000 to spend. Suppose the government wants to give Robin enough money so that he can still consume the amount of X and Y that he was consuming before the price change. Which of the following statements is CORRECT? O At the earlier prices, Robin would consume 75 units of X and 100 units of Y. This bundle now costs $2750. But if the government gave Robin an additional $750 then Robin would prefer to consume 80 units each of X and Y. O At the earlier prices, Robin would consume 50 units of X and 100 units of Y. This bundle now costs $2500. So, the government needs to give Robin an additional $500 to afford the original bundle. But if the government gave Robin an additional $200 then Alex would prefer to consume 100 units each of X and Y. O At the earlier prices, Robin would consume 200 units of X and 50 units of Y. This bundle now costs $3000. So, the government needs to give Robin an additional $1000 to afford the original bundle. But if the government

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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