A consumer's preferences over bundles of two goods, (x,y) can be represented by the utility function U(x,y)= xy. The consumer's income is $160, and initially, the price of x is Px = $8 , and the price of y is Py = $1. Then the price of y increases to Py = $2.

a) Compute the quantities of x and y that the consumer will demand before and after the increase in the price of y. Also, compute the utility that the consumer was "obtaining" before the increase in the price of y.

b) Compute the substitution and income effects on the consumption of y of this increase in the price of y