Suppose that consumer has the following utility function: U(X,Y)= X¹/2y¹/2 and Px = 1, Py =4 and I 720. Suppose now that Px goes up to 4. What is the magnitude of the income effect on goodX?O90- 90180O-180P

We have cobb Douglas utility function for the consumer and initial prices and income are. Px = 1, Py…

Suppose that consumer has the following utility function: U(X,Y)= X1/2y1/2 and Px = 1, Py = 4 and 1= 720. Suppose now that Px goes up to 4. What is the magnitude of the income effect on good X? O 90 - 90 180 -180

Suppose that consumer has the following utility function: U(X,Y)= X1/2y1/2 and Px = 1, Py = 4 and 1= 720. Suppose now that Px goes up to 4. What is the magnitude of the income effect on good X? O 90 - 90 180 -180

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter6: Consumer Choices

Section: Chapter Questions

Problem 8RQ: Is it possible for total utility to increase while marginal utility diminishes? Explain.

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Product and Price Bundling

Product and price bundling is used as a marketing strategy by businesses, where complementary products and services are combined and sold as a package deal. This bundled price is usually less than the total price of the individual products if they were to be sold separately. When bundled and sold, each product is sold at a reduced price. Using a price bundling strategy helps increase the average revenue per user and also increases the engagement with the user. This happens as the perceived value of the bundled products is more than the individual products.

Question

Suppose that consumer has the following utility function: U(X,Y)= X¹/2y¹/2 and Px = 1, Py =
4 and I 720. Suppose now that Px goes up to 4. What is the magnitude of the income effect on good
X?
O90
- 90
180
O-180
P

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