2. Your roommate Josie watches movies and shows on TV using services like itunes. In modeling Josie's preferences, we will assume that they are Cobb-Douglas over TV seasons (x-axis good) and a numeraire Good which always has a price of $1.00 (note: we use the notion of a numeraire good to represent spending on all other consumption goods - in this example, that means everything other than TV seasons - its price is always $1). Josie lives off a monthly income of $1,000 the price per season of TV services is $50 and, Josie's utility function is U = C4X.6 a. What of her income does Josie spend on TV shows? Using this share, calculate Josie's consumption of the numeraire good and TV shows. b. What is Josie's utility? c. Set up the expenditure minimization problem to achieve a target utility level, U. d. Sketch the substitution method where you solve the problem by plugging into the utility function so that X = X(C, U). Solve for the compensated (Hicksian) demand for C and X. e. Show that the expenditure function is given by: EXP = U * (Px/0.6)-6 * (Pc/0.4).4 . Suppose Px=6 and Pc=4. How much money is necessary to achieve utility of 100? f. It is predicted that a proposed end to net neutrality will increase the market price of seasons from $50 to $ 100. Use the implied change in the expenditure function to compute Josie's Compensating Variation for this potential price increase