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Hi i need answer for this question blew. 2*. Assume that Bob has a budget constraint...

Hi i need answer for this question blew.

2*. Assume that Bob has a budget constraint p1x1 + p2x2 = m, and that his preferences are represented by the Cobb-Douglas utility function U(x1, x2) = x1 c x2 d , where c>0 and d>0. State Bob’s optimization (utility maximization) problem.

A-Now assume that c=1/4 and d=3/4, m=160, p1=4 and p2=2. Calculate the income and substitution effects from an increase in price of x1 from p1=4 to p1=5.

b) Illustrate these effects in a graph.

Br//H

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Answer #1

1 (H) 입 3M) (160 38.3365(V 30) 10 8.5 -10 2 (-IS

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