Marta consumes only goods X and Y and faces the following utility function: U=7 X+4 Y. The marginal utility for X is MUX=7 and the marginal utility for Y is MUY=4 . The price of X is $10 and the price of Y is $50. Marta has an initial budget of $200.
How many of X and Y will Marta buy given her utility function, her budget, and the prices?
Suppose that the government places a restriction on X so that Marta can only buy 10 X.
How much of Y must Marta buy in order to achieve the same level of utility prior to the restriction?
(Round to the nearest 2 decimals places, we will NOT give marks for answers with rounding errors.)
What is the corresponding compensating variation?
(Round to the nearest 2 decimals places, we will NOT give marks for answers with rounding