Problem 4. Consider the quasilinear preferences from Problem 2 of last week's problem set: u(x1,x2) = ZJXl +x2 Naturally, feel free to use your solutions from last week (demand functions etc.) in doing this problem! a) b) Suppose that m = $10, p1 = $1, 132 = $2. Find the substitution and income affects for both goods associated with a rise in the price of good 1 to p1 = $2. Given what you know about the geometry of the indifference curves, (See Problem 2a) last week), explain using a diagram why (as long as m > gag/pl) there is no income effect for good 1. Write down the indirect utility and expenditure functions associated with this utility function. Find the CV and EV associated with the price change in part a). Why are they the same? [Hint I've left this open ended on purpose as I want you to think this through. It turns out that the difference between CV and EV is due to income effects and if we shut these down the two would be identical. Don't stress, there's really no 'right answer' to this question. As for many problem set questions in this class, it's not the answer that's really important, it's the thinking you do to get there.]