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1. A consumer has the utility function U ( x 1 , x 2 )= min {2x 1 ,x 2 } and an income of
1. A consumer has the utility function U ( x1, x2)= min {2x1,x2} and an income of $200. Initially, the price of good 1 is $6 and the price of good 2 is $2.
a) Find consumer's demand function for good 1.
b) Then, price of good 1 decreases to $ 4 and price of good 2 stays at $2. What is the total change in demand for good 1? Show the income and substitution effects of this price change both graphically and algebraically.
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