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# Nick has a utility function U ( x , y ) = x 2 y 2 and faces the budget constraint pxx + pyy = Y . a,Suppose that Y =120, py =1 and px =4.

Nick has a utility function U(x, y) = x2 y2 and faces the budget constraint pxx+pyy=Y.

a,Suppose that Y =120, py =1 and px =4. What are Nick's utility maximizing

amounts of good x and good y? What level of utility is Nick able to attain?

b,If the price of x is lowered to px =2, what are Nick's utility maximizing amounts of good x and good y? What level of utility is Nick able to attain?

c,What is the most Nick is willing to pay to have px reduced from 4 to 2?

d,Suppose that Y =120, py =1 and px =4. How much additional income does Nick

need to receive in order to be as well off as when px = 2?

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