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1) Hicksian demand can be used to identify the substitution bundle following a price change. For simplification, assume that U= sqrt (Qx⋅Qy) , income = 100 and Px = Py = $1.?
a) Given the information above, what is the optimal level of consumption?
b) What is the level of utility obtained, given this consumption?
c) Now let the price of good X increase to $2. What is the new level of consumption?
d) What is the new level of utility obtained, given this consumption?
e) What is the amount of good X consumed if we wanted to keep utility constant at the original level, but considering the new prices?
f) What is the amount of good Y consumed if we wanted to keep utility constant at the original level, but considering the new prices?
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