Let U(x,y) = $\sqrt { x y }$ With MU_x = $\frac { \sqrt { y } } { 2 \sqrt { x } }$

question 13

Multiple Choice

Let U(x,y) = $\sqrt { x y }$ with MU_x = $\frac { \sqrt { y } } { 2 \sqrt { x } }$ and MU_y = $\frac { \sqrt { x } } { 2 \sqrt { y } }$ . Let I = $100, P_x = $10 and P_y = $10 be the initial set of prices and income. Now, let P_x rise to $25. What are the (approximate) substitution and income effects of this change in prices?

• A) Income effect = -3.3; Substitution Effect = -2.1
• B) Income effect = -2.3; Substitution Effect = -1.7
• C) Income effect = -1.3; Substitution Effect = -1.7
• D) Income effect = -1.7; Substitution Effect = -1.3

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Definitions:

Trial Balance

A bookkeeping report that lists the balances in each of a company's general ledger accounts in two columns, debits and credits, ensuring that total debits equal total credits.

Accounts Balances

The amounts in accounts that represent the difference between the debits and credits recorded.

Retrograde Pyelography

A radiologic procedure in which the doctor injects a contrast medium through a urethral catheter and takes a series of X-rays to evaluate the function of the ureters, bladder, and urethra.

Contrast Medium

A substance used in medical imaging to improve the visibility of internal body structures.