Question: consider a consumer whose utility function is given by ux...
Consider a consumer whose utility function is given by U(x, y) = x^1/3 y^2/3, where x and y represent quantities of consumption of two consumer goods.
(a) If the consumer’s income is $100 and the prices of x and y are both $1, how should the consumer maximize her utility? What is her maximum level of utility?
(b) If the price of y rose to $2, what would be the resulting income and substitution effects? Illustrate your answer.