Suppose u = (x1)^1/2 (x2)^1/2 Initially we have PI = P2 1, but then PI rises to 2. The consumer's income is $40

a) Using the method in question 1 solve for the demands for goods 1 and 2. Solve for the optimal points both pre and post price change and show these point on a clear complete graph.

b) Define in words what the CV associated with this price change represents for this consumer. Using the method covered in class, solve for the CV associated with this price change for this consumer. Show this on a graph.

c)Define in words what the EV associated with this price change represents for this consumer. Solve for the EV associated with this price change for this consumer. Show this on a graph.

d)Which measure of welfare change is larger? Why?