Question

Charlie’s utility function is ????(x????,x????) = x????x????. The price of apples used to be $1, the price of bananas used to be $2, and his income used to be $40. If the price of apples increased to $5 and the price of bananas stayed constant, the substitution effect on Charlie’s apple consumption would reduce his consumption by (choose the closest answer) (a) 4 apples (b) 13 apples

Answer 1

The other options are ; (a) 4 apples (b) 13 apples (c) 11 apples (d) None of the above

Step-by-step explanation:

The detailed analysis and step by step calculation is as shown in the attached files.

The correct option is NONE OF THE ABOVE