Richard has CES preferences u = x1/2 + y1/2 and an income of 600. He pays...

Richard has CES preferences u = x1/2 + y1/2 and an income of 600. He pays pX = 2 and pY = 1. Now pX = 1. Provide an indifference curve diagram and supporting calculations to illustrate and quantify his initial bundle A and final bundle C his Slutsky substitution effect as Bundle B and Hicksian substitution effect as Bundle H.

x^1/2 y^1/2

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Rahul Sunny answered 1 year ago

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