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24-05-2023
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For each of the utility functions below calculate the Substitution effect and Income effect when the price of x₁ changes from $10 to $25. Income is $1000 and the price of x2 stays constant at $20. (a) u(x₁, x₂) = x² + x² (b) u(X1, X2) = 2x1+x2 (c) u(x1, x₂) = 10x0.5 + x2

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