Answer to Question #273819 in Microeconomics for Jojo

Question #273819

Stuart's utility function for goods X and Y is represented as U(X,Y)=X0.8Y0.2. Assume that his income is $100 and the prices of goods X and Y are $20 and $10, respectively.




Now a government subsidy program lowers the price of X from $20 per unit to $10 per unit.






(e) Calculate and graphically show the change in good X consumption resulting from the program.









(f) Graphically show the change in consumption attributable to the separate income and substitution effects.






(g) Show (graphically) how much the program cost the government.

1
Expert's answer
2021-12-09T07:45:05-0500
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