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Question 6 (10 points) [10 marks] For the following question, . You get two marks for choosing the correct answer. . You get up to

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Question 6 (10 points) [10 marks] For the following question, . You get two marks for choosing the correct answer. . You get up to 8 marks for the detailed solution. You need to explain every option (whether it is true or false) to get full marks. Suppose that a consumer has a utility function u (x, y) = x y. He originally faces prices (Pxxpy) = (1, 1) and has income 30. Then the price of good x increases to 2. (a) The compensating variation is 15. (b) The compensating variation is larger than the original income. (c) The equivalent variation is 17. (d) The equivalent variation is larger than the compensating variation. (e) None of the above

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