Question

Suppose a consumer’s utility function is given by U(X,Y) = (X^1/2)*(Y^1/2), where the consumer has $32 to spend,

Px = $1, and Py = $4. Now, suppose that Px has increased to $4. How much additional money would the consumer need to have the same utility level after the price change as before the price change?

I have already calculated that with the original prices, the consumer should purchase 16 X and 4 Y to maximize her utility to receive a total utility of 8. After the price change, I have calculated that the consumer should purchase 4 X and 4 Y to maximize her utility post-price change.

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