Business, 22.10.2020 19:01 damilysgonzalez2

Imagine you consume two goods, K and L, and your utility function is U = K1/3L2/3. Your budget is $120; PK = $6; PL = $9. So, the optimal bundle for you to consume is (K = 6.6667, L = 8.8889). Now, suppose the price of good K increases to $9. The compensated price bundle is (K = 5.0976, L = 10.1952). What is the substitution effect on K?

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Imagine you consume two goods, K and L, and your utility function is U = K1/3L2/3. Your budget is $1...

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