This question needs a perfect scan, a very clear diagram (a clearly labelled diagram, with clearly labelled curves, points, etc.).

Goods X and Y are perfect substitutes for you.

1. Write down your utility function (any utility function that shows X and Y are perfect substitutes for you). Plot one of your indifference curves. Please write down on that indifference curve the value of your utility function.

Your income is 56.

2. Currently the price of good has a value such that your budget line is steeper than your indifference curves. Write down the equation of your current budget line and plot it on the same diagram you used to answer question 1. (Choose any value of the price of good X consistent with this question.)

3. The price of good X changes such that your budget line becomes flatter than your indifference curves. Write down the equation of your new budget line and plot it on the same diagram you used to answer question 1 and 2. (Choose any value of the price of good X consistent with this question.)

4. Show graphically in your diagram (the same diagram you used to answer questions 1, 2 and 3) the equivalent variation of the change in price of X.

5. Show graphically in your diagram (the same diagram you used to answer questions 1, 2, 3 and 4) the compensating variation of the change in price of X.

6. Calculate (and explain your calculations!) the EV and CV of the price change of good X.