Question
Hannah spends all her 500 weekly income on two goods, T and C. Her utility function is given by U(T,C) = T + C. b.
Hannah spends all her 500 weekly income on two goods, T and C. Her utility function is given by U(T,C) = T + C.
b. Suppose the price of C increases from 2 to 4, derive the income and substitution effect. (Enter your answers as whole numbers. Answers should be positive, do not include negative numbers or minus signs. Enter 0 if necessary.)
Substitution effect:
Income effect:
c. Suppose the price increases again from 4 to 6, derive the income and substitution effect. (Enter your answers as whole numbers. Answers should be positive, do not include negative numbers or minus signs. Enter 0 if necessary.)
Substitution effect:
Income effect:
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