answers. Question 11 (30 marks) Mona's preferences over bundles of two goods X and Y, are given by the utility function, u(x,y) = x0 5yo.5, Mona's income is I and she can buy X and Y in the market at prices p. and py. respectively. (a) Derive Mona's demand function for the two goods. (7 marks) Suppose / = 200 and the price of X changes from pe = 20 to py = 40. (b) Calculate the compensating variation of the price change. (9 marks) (c) Calculate the equivalent variation of the price change. (9 marks) (d) Now, suppose the government help relieve Mona's burden. It can do this cither by giving her a per unit subsidy on the consumption of X. Alternatively, the government could give her the equivalent variation of the subsidy as an income transfer. Which scheme will Mona prefer