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Matt spends $40 per month on peanut butter (good x, measured in jars) and bread (good y, measured in loaves). He wishes to consume the goods according to the following utility function: u(x,y) = min(2x,y). Last month, the price of a jar of peanut butter was $5 while each loaf of bread was priced at $2.50. This month, the price of bread rose to $4 per loaf while Matt’s preferences, income and the price of peanut butter remained the same. Identify the compensatory income that corresponds to this price change.
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