A consumer purchases two goods, food and clothing. The utility function is U(x, y) = √xy, where x denotes the amount of food consumes and y the amount of clothing. The marginal utilities are MUX = √y/(2√x) and MUy=√x/(2√y). The price of food is Px, the price of clothing is Py, and income is I. a) Show the equation for the demand curve for food is x = 1/(2Px). b) Is food a normal good? Draw D₁, the consumer's demand curve for food when the level of income is I = RM120. Draw D₂ the demand curve when I = RM200.

A consumer purchases two goods, food and clothing. The utility function is U(x, y) = √xy, where x denotes the amount of food consumes and y the amount of clothing. The marginal utilities are MUX = √y/(2√x) and MUy=√x/(2√y). The price of food is Px, the price of clothing is Py, and income is I. a) Show the equation for the demand curve for food is x = 1/(2Px). b) Is food a normal good? Draw D₁, the consumer's demand curve for food when the level of income is I = RM120. Draw D₂ the demand curve when I = RM200.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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