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In: Economics

Imagine you consume two goods, X and Y, and your utility function is U = X1/2Y1/4....

Imagine you consume two goods, X and Y, and your utility function is U = X1/2Y1/4. Your budget is M = 630; PX = $10; PY = $30. Now imagine PX increases to $25. The compensated price bundle is (30.9458, 12.8941). What is the income effect on X?

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