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A) Maximize Rob's utility and solve for his demand for x and c in terms of , then calculate when = 0.75 B) Now suppose
A) Maximize Rob's utility and solve for his demand for x and c in terms of , then calculate when = 0.75 B) Now suppose the government subsidizes consumption of good x with a 50% proportional subsidy. Solve for Rob's demand for x and c under the subsidy C) Graph utility maximizing choice from part A) and then from part B) (put c on the vertical axis) D) Calculate the income and substitution effects on Rob's consumption of x resulting from part B) 1
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