Business, 30.03.2020 15:48 Headahh9986

1. Suppose a consumer has a utility function U(x1,x2) = x1x2. The con- sumer has an income of $24. Initially, pi-1 and P2 2. The price of good 2 rises to $3, while the price of good 1 stays the same. The consumer's demand function is given by Di (P1,P2, m) = 2 for good 1 and D2(pi, P2, m) = 2 for good 2. Find the following: P2 a) How many units of good 1 and good 2 are demanded by the consumer before the price change? b) Find the consumer's m' at which her old bundle is affordable. c) Find the consumer's substitution effect for good 2. d) Find the consumer's income effect for good 2. Hint: For parts c and d, you can ignore good 1 and do it the way we did in class.

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1. Suppose a consumer has a utility function U(x1,x2) = x1x2. The con- sumer has an income of $24. I...