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Hi there, didn't receive feedback for these questions from a problem set I was given. I'm struggling to see how to answer them. 15)A consumer's
Hi there, didn't receive feedback for these questions from a problem set I was given. I'm struggling to see how to answer them.
15)A consumer's preferences over bundles of goods x, and x2 (with prices p, = El and p2 = E1, respectively) are represented by the utility function u (x1, x2) = x,/x2/. What is the substitution effect on x2 (Asx2) if the price of good x2 increases to p; = 62. Assume that the income of the consumer that is allocated to the consumption of x, and x2 is m = $10. a) Asxz = -2.5. b) Asx2 = +2.5. c) A X2 = -1.25. d) Ajx2 = +1.25. 16)Which one of the following utility functions for the bundles of goods x, and x2 represents strictly concave and weakly monotone preferences? a) u(x1,x2) = min(x1,x2). b) v(x1, X2) = max(x1, x2]. c) w(x],x2) = -xil - xzl. d) z(x1,*2) = *1 - X2Step by Step Solution
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