Exercise 4 by the quasilinear utility function u(x, y) = x¹/² + y. a) Derive his demand functions of good x and good y. b) Look at the demands of good x and good y you found in part (a). Explain how an increase in income would affect the quantity of x and the quantity of y David optimally consumes. [Hint: You can do a visual check or take the partial derivative of the demand of each good with respect to income and check whether this partial derivative is positive or negative] Is good x a normal good? Is good y a normal good? ● David is a consumer whose preferences over goods x and y are represented ●

Exercise 4 by the quasilinear utility function u(x, y) = x¹/² + y. a) Derive his demand functions of good x and good y. b) Look at the demands of good x and good y you found in part (a). Explain how an increase in income would affect the quantity of x and the quantity of y David optimally consumes. [Hint: You can do a visual check or take the partial derivative of the demand of each good with respect to income and check whether this partial derivative is positive or negative] Is good x a normal good? Is good y a normal good? ● David is a consumer whose preferences over goods x and y are represented ●

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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