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Luigi's preferences between pizza (x) and other goods(y) are represented by U (x, y) = x + y and his income is 120. (a) Compute
Luigi's preferences between pizza (x) and other goods(y) are represented by U (x, y) = x + y and his income is 120.
(a) Compute the optimal bundle when px = 3 and py = 1.
(b) Decompose in income and substitution effects the variation when the price of y increases to 4.
Please resolve the exercise with the Slutzky equation.
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