Question

Q.Consider a consumer who consumes two goods X and Y, priced at PX and PY,
respectively. Suppose price of good X rises to PX’. Decompose price effect of this price
increase into substitution and income effect using Hicksian approach

Answer 1

Answer:

1. if the x price rise so the y demand rise because it is a substitute for x like if tea price rise the coffe demand rise
2. if the x price rise so y demand get down because the income of the consumer rise then the y goods become inferior goods for them