Answer to Question #252602 in Microeconomics for CHRIS

Question

Mary spends her income(M) on good X and Y. Her preferences are represented by the
utility functionX, Y = Ln X + Y. The price of good Y is 1 and the price of good X is P.
(a) Derive Maryà ƒ ƒ ƒ ¢ € ™s demand for X.
(b) Suppose the price of X fell from $1 to $0.50, calculate the substitution effect and
income effect for the change in X.

Answer 1

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