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Lilyhas the utility function U=40A^0.5B0.5. The prices of the two goods A and B are initially #20 and #5 per unit respectively, Lilly's income is
Lilyhas the utility function U=40A^0.5B0.5. The prices of the two goods A and B are initially #20 and #5 per unit respectively, Lilly's income is #600. The price of A then falls to #10. Work out the income and substitution effects of this price change on the amount of A consumed using Hiick's method and say whether A and B are normal or inferior goods.
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