Substitution and income effects in units, Macroeconomics

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Individual A has UA(XA,YA)=lnXA+2YA and has $500. PX=5 and PY =10.

(a) Find the optimum. Show that it is indeed the maximum.

(b) PX=10. Find the new optimum.

(c) Calculate the substitution and income effects in units of Y associated with this change in price.

(d) Graph your answers in (a), (b) and (c) on the same graph.


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