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Please show full math and an answer for each part! Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies
Please show full math and an answer for each part!
Maya is doing her undergrad at Queen's University. She loves donuts and chocolate chip cookies (CCC). Her utility function is given by u(x, y) = V8x + 5 + 2y, where x denotes her consumption of donuts and y denotes her consumption of CCC. Her budget is $10/day. The price of a donut is $1. (a) When the price of CCC is $1, what is Maya's optimal choice of donuts and CCC? (b) When the price of CCC is $8, what is Maya's optimal choice of donuts and CCC? (c) When the price of CCC increases from $1 to $8, calculate Maya's substitution effect and income effect. (d) According to your calculation in part (c), is CCC a normal good or an inferior good? Explain. Is CCC an ordinary good or a Giffen good? ExplainStep by Step Solution
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