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(a) Using two goods X1 and X2 with their respective prices P_(X_1)^0 and P_(X_2)^0, where both goods are normal goods….

December 14, 2020

(a) Using two goods X1 and X2 with their respective prices P_(X_1)^0 and P_(X_2)^0, where both goods are normal goods. If the price of good X1 increased from P_(X_1)^0to P_(X_1)^1, Using labeled diagram, explain and identify using either Hicksain approach or Slutsky approach the:-
i. Total change in demand for X
ii. Substitution effect
iii. Income effect