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Imagine you consume two goods, X and Y, and your utility function is U = XY....

Imagine you consume two goods, X and Y, and your utility function is U = XY. Your budget is $100, the price of Good X is $4, and the price of Good Y is $25. So, the optimal bundle for you to consume is (12.5, 2). Now the price of good X increases to $10. The compensated price bundle is (7.91, 3.16). What is the income effect on X?

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PAXI + Pg X 2 =100 Ans AS we are given that the budget = 100 when, Price - SL of X (PI) Price of Y (P2) And the given optimumBut the Consumer has made small Purchase increase in the Purchase of Y good and small decrease decrease in the of X good. The

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