1. An individual has preferences over goods x and y of U=min{x,2y}. When price of x increases, what
share of the demand response of x is due to a substitution effect? In other words, what is pxhx/pxg
x ? (a) 0 (b) 1/2 (c) 1 (d) Not enough information Suppose an individual has preferences over x
and y, and both goods are normal goods for the individual. Which of the following elasticities and
expenditure share sx can possibly be true? (a) x,px=0.4,x,py=0.2,x,I=1,sx=0.2,y,I=1 (b) x,px=0.8,x,
py=1,x,I=0.2,sx=0.2,y,I=1 (c) x,px=1.2,x,py=0.2,x,I=1,sx=0.2,y,I=1