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Alice consumes goods x and y. Her demand for x is given by x(px, m) = 0.04m 4.24px. Now her income is 322, the price
Alice consumes goods x and y. Her demand for x is given by x(px, m) = 0.04m 4.24px. Now her income is 322, the price of x is 2, and the price of y is 1. If the price of x rises to 3 and if we denote the income effect on her demand for x by DI and the substitution effect on her demand for x by DS, then using Slutsky's approach,
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