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Suppose that Sam has a utility function u( x , y )= x+y where x is the amount of good 1 and y is the
Suppose that Sam has a utility function u(x,y)=x+ywhere x is the amount of good 1 and y is the amount of good 2. The price of good 2 is $20, and the income is $ 90.
1) With the $20 price decrease of good 1 from $30 to $10, thenwhat is the substitution effect and income effect on the demand for good 1?
2) With the $5 price decrease of good 1 from $10 to $5, thenwhat is the substitution effect and income effect on the demand for good 1?
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