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Consider an individual making choices over two goods, x and y with initial prices P x = 5 and P y = 2, with income I=100:

Consider an individual making choices over two goods, x and y with initial prices Px= 5 and Py= 2, with income I=100: 

  1. If the individual's preferences can be represented by the utility function u = 4x+ 2y; find the income, substitution and total effects of a decrease in the price of x to Px= 3. 
  2. If the individual's preferences can be represented by the utility function u = min(4x,2y); find the income, substitution and total effects of a decrease in the price of x to Px=3.

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