Question
hi this is my home work question G. Slutsky Equation (Chapter 8) G1. Kyra, a vegan, regularly consumes apples and bananas. Her utility function is
hi this is my home work question
G. Slutsky Equation (Chapter 8)
G1. Kyra, a vegan, regularly consumes apples and bananas. Her utility function is (, ) = where xA and xB denotes consumption for apples and bananas, respectively. The unit price per apple is R1 and per banana is R2, while Kyra's income allocation is R40 a day. The price per banana suddenly falls to R1.
G1.1 Derive Kyra's demand functions for apples and bananas. Show all calculations. [5]
G1.2 Derive, with supporting mathematical techniques, the Slutsky income effect and substitution effect of the price change from the demand functions derived in (G1.1). [7]
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