Let U(x,y) = $\sqrt { x y }$ With MU_x = $\frac { \sqrt { y } } { 2 \sqrt { x } }$

Multiple Choice

Let U(x,y) = $\sqrt { x y }$ with MU_x = $\frac { \sqrt { y } } { 2 \sqrt { x } }$ and MU_y = $\frac { \sqrt { x } } { 2 \sqrt { y } }$ . Let I = $100, P_x = $10 and P_y = $10 be the initial set of prices and income. Now, let P_x rise to $25. What are the (approximate) substitution and income effects of this change in prices?

A) Income effect = -3.3; Substitution Effect = -2.1
B) Income effect = -2.3; Substitution Effect = -1.7
C) Income effect = -1.3; Substitution Effect = -1.7
D) Income effect = -1.7; Substitution Effect = -1.3