|Question||Antonio’s utility function for the goods X and Y is U(X, Y) = 2(?X + ?Y). a. What is his MRSXY? Do his preferences satisfy the declining MRS property?
b. Suppose his monthly income is $1800 and X and Y both cost $1 per unit. What is his best choice?
c. Suppose the price of good X rises to $2 per unit. What is his new best choice? Decompose the change in his purchases into substitution and income effects. What is his compensating variation for the price change?