An individual is consuming two goods, good x and good y. His utility function is given as Perfect Substitutes: U(x, y) = 2x + 2y Assume that m = 200; p₁ = 1; P₂ = 2; p₁ = 2 P2 1. Calculate for the CV and the EV of the individual (HINT: If perfect substitutes, the consumer will only consumer either good x or good y; thus he will spend all on either good x or good y).
An individual is consuming two goods, good x and good y. His utility function is given as Perfect Substitutes: U(x, y) = 2x + 2y Assume that m = 200; p₁ = 1; P₂ = 2; p₁ = 2 P2 1. Calculate for the CV and the EV of the individual (HINT: If perfect substitutes, the consumer will only consumer either good x or good y; thus he will spend all on either good x or good y).
Chapter5: Income And Substitution Effects
Section: Chapter Questions
Problem 5.4P
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Transcribed Image Text:An individual is consuming two goods, good x and
good y. His utility function is given as Perfect Substitutes:
U (x, y) = 2x + 2y
Assume that m = 200; p₁ = 1; P₂ = 2; p₁ = 2
P2
1. Calculate for the CV and the EV of the individual (HINT: If
perfect substitutes, the consumer will only consumer either
good x or good y; thus he will spend all on either good x or
good y).
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