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1.Kelera maximizes her satisfaction by consuming Good X and Good Y. Her utility function is She works for 45 hours per weeks and earns $5
1.Kelera maximizes her satisfaction by consuming Good X and Good Y. Her utility function is She works for 45 hours per weeks and earns $5 per hour. Price of Good X is $5 which price of Good Y is $2. After 1 month she noticed due to Covid 19, price of Good X has doubled while price of Good Y and her income remained unchanged.
A)Calculate the substitution effect of increase in price of Good X on consumption of good X(5 marks)
B)Calculate the income effect of increase in price of Good X on consumption of good X
(5 marks)
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