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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question

Transcribed Image Text:Question 1
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 MUX=√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.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON

Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education