A Californian student consumes Internet services (I) and books (B). Her preferences are represented by a Cobb-Douglas utility function: U(I, B) = I 1/4B 1/4 The price of each good is $2, and the student has an income of $200. Over the past year, the price of internet services has risen to $4, but the price of books has remained the same. Therefore, the government has decided to provide this student with additional money to compensate for the higher price of internet services. To determine the transfer, the government has two consultants who have made the following suggestions:

Consultant A: The students income should be increased by a percentage found using a consumer price index (CPI).

Consultant B: The additional income should allow the student to get her initial level of utility.

Show your work

10 (a) The amount of transfer implied by consultant A is $84.82 $82.84 $100 $282.84

Show your work 15 (b) The amount of transfer implied by consultant B is $84.82 $82.84 $100 $282.84