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Compute the substitution effect and income effect associated

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Reference no: EM13339980

1. Compute the substitution effect and income effect associated with a multiplicative price increase Δ in pY, that is, multiplying pY by Δ>1, for the case of Cobb-Douglas utility u(x,y)= xαy1−α.

2. Show that an increase in the wage increases the consumption of goods, that is, x increases when the wage increases.

Reference no: EM13339980

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