SEx= +0.5 IE y = -0.5 SEy = -0.25 IET = -0.25 %3D %3! O SEx= +0.293 IEx = -0.293 SEy = -0.414 IET = +0.414 %3D %3D SEx = +0.25 IEx = -0.25 SEy = -0.75 IET = -0.75 %3D %3D O SEx= +0.414 IEx = -0.414 SEy = -0.293 IET %3D - 0.207 %3D
SEx= +0.5 IE y = -0.5 SEy = -0.25 IET = -0.25 %3D %3! O SEx= +0.293 IEx = -0.293 SEy = -0.414 IET = +0.414 %3D %3D SEx = +0.25 IEx = -0.25 SEy = -0.75 IET = -0.75 %3D %3D O SEx= +0.414 IEx = -0.414 SEy = -0.293 IET %3D - 0.207 %3D
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Income = $3 Px= $1, Py= $2
![A consumer has the following utility function: U(x, y) = xy -y; *21 where x and y represents the quantities consumed of goods X and Y.
y 20
What will be the substitution and income effects for X and Yassuming that the consumer attempts to maintain the same level of utility achieved
before price of Y increased (that is, when price of Y was $1)?
SEx = +0.5 IEy = -0.5
SEy = -0.25 IEY
-0.25
SEx= +0.293 IEy = -0.293
SEy = - 0.414| IEY
!!
+0.414
SEx = +0.25 IE, = -0.25
SEy = -0.75 IEY
!!
%3D
-0.75
O SEx = +0.414 IEY = -0.414
SEy = -0.293 IEy = -0.207
!!
%3D](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd8de076b-9bfe-4bdd-a177-3f8544ff323f%2F14582f68-5262-4ad3-92da-e78d947f03e4%2Fyrkzfj3_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A consumer has the following utility function: U(x, y) = xy -y; *21 where x and y represents the quantities consumed of goods X and Y.
y 20
What will be the substitution and income effects for X and Yassuming that the consumer attempts to maintain the same level of utility achieved
before price of Y increased (that is, when price of Y was $1)?
SEx = +0.5 IEy = -0.5
SEy = -0.25 IEY
-0.25
SEx= +0.293 IEy = -0.293
SEy = - 0.414| IEY
!!
+0.414
SEx = +0.25 IE, = -0.25
SEy = -0.75 IEY
!!
%3D
-0.75
O SEx = +0.414 IEY = -0.414
SEy = -0.293 IEy = -0.207
!!
%3D
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