A consumer has the following utility function: U (x, y) = (x + a) (y + b) Prices of the two goods x and y respectively are px and py and the consumer has income m. We assume that all prices and income are strictly positive. Furthermore, throughout this question we assume that m is high enough so that both x and y are strictly positive in equilibrium. (a) Solve the consumer’s optimization problem and express the demand for the two goods in terms of prices and income.

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Q: utility function

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Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.