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1-Using the following budget constraint: 600 = 1X + 2Y, Utility U = /XY A. MmO 0w How many Xs and Y's do you buy,
1-Using the following budget constraint: 600 = 1X + 2Y, Utility U = /XY A. MmO 0w How many Xs and Y's do you buy, how do you divide your budget, and what is the level of utility achieved? The government grants a Subsidy (the opposite of a tax) of $1 on Y. What are the new quantities of X and Y purchased? . What is the total amount the government spends on the Subsidy? . What is the level of Utility achieved? If the same amount of Subsidy is added to income would you achieve a higher utility level? Calculate, Graph and Explain using the logic of the Lump-Sum Principle we saw in class
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