Question
vero's utility function is U = x a y 1-a where x denotes her consumption of good X, y denotes her consumption of good Y
vero's utility function is
U = xa y1-a
where x denotes her consumption of good X, y denotes her consumption of good Y and a = 0.6.
The price of good X isPx = 16, the price of good Y isPy = 15 and Lan's income is M = 489.
Suppose there is inflation such that each price increases by 3 dollars and the government. Lan's income is a pension which can be adjusted by the government.Suppose the government adjust Lan's pension so that it increases by a rate equal to the inflation rate.Will this be enough to compensate Lan for inflation?
If it is exactly the right amount, enter 0 below.
If it is more than enough, enter 9 below.
If it is less than enough, enter 489 below.
If there isinsufficient information to answer the questions, enter 0.6 below.
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