Suppose a consumer with a utility function U(x,y) =x^(0.5)y^(0.5) and an income of $1,000.00. Considering that products X and Y are sold by the kilo and that their prices are 50.00 and 100.00 respectively, calculate:
a) Maximizing amounts of x and y for the consumer
b) Graphically sketch the consumer balance
c) What would be the impact on the utility of this consumer, if a policy of distribution of good X was established so that each period the consumer "earns" 20 units of X at no cost? What will your new balance be?
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