Google X Study : X = Study X Paraph x 1 Conter X Bb 17642 X E Bb 17502 X Bb 17642 X Bb Duratic X Bb 176427 X econor X Guided X G 20 learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5d2cb9c32e9d7/17587471?X-Blackboard-$3-Bucket=le... ES Relaunch to update : Duration of programme: XX months 1 / 4 149% + Iston University dusty gefunden Questions CURED STUDY SHEET 1. Assume that Matt's utility from consuming good X and good Y is given by the following Cobb Douglas utility function: U = 2X0.75 Y0.25 1 Where X is the quantity of good X while Y is the quantity of good Y. Assume the price of X (Px) is $5, the price of Y (PY) is $2.50, and he has a budget (M) of $1600 to spend on the two goods. a. Using the Marshallian demand functions, calculate the quantities of X and Y Matt should purchase to maximise his utility. Calculate the utility this optimal consumption bundle provides. (You must clearly show all 2 working and explain the economic intuition to receive marks for this question). b. Assume Px decreases from $5 to 3 while PY and M remain unchanged. Using the Marshallian demand functions, calculate Matt's new optimal consumption bundle and the utility it provides. (You must clearly show all working and explain the economic intuition to receive marks for this 3 question).Google X Study : X = Study X Paraph x | Conter X Bb 17642 X E Bb 17502 X Bb 17642 X Bb Duratic X Bb 176427 X econor X Guided X G 20 learn-eu-central-1-prod-fleet01-xythos.content.blackboardcdn.com/5d2cb9c32e9d7/17587471?X-Blackboard-$3-Bucket=le... ES Relaunch to update : Duration of programme: XX months 2/ 4 | 149% + Aston University Summergo and or BEES GUIDED STUDY SHEETS c. Calculate the income and substitution effects of the decrease in price of good X from $5 to t3 on both good X and Y using: - The Slutsky decomposition. - The Hicksian decomposition. (You must clearly show all working and explain the economic intuition to receive marks for this question). d. Using the expenditure function for this utility function, calculate the compensation variation and the equivalent variation of the price decrease of good X from 5 to $3. (You must clearly show all working and explain 2 the economic intuition to receive marks for this question). e. Using the Hicksian demand function for this utility function, calculate the income and substitution effects of the fall in the price of good X holding utility constant at its new level after the price change i.e. the equivalent variation. Calculate the income and substitution effects on both the demand for X and Y. (You must clearly show all working and explain the economic intuition to receive marks for this question). 3 f. Using the results from all your answers to the previous questions illustrate the impact of the price decrease of good X from $5 to $3 on an indifference curve/budget constraint diagram. In particular, clearly explain and label