1. Suppose David spends his income (I) on two goods, x and y, whose marketprices are p and py, respectively. His preferences are represented by the utilityfunction (x, y) = lnx + 2lny (MU₂ = 1/x, MUy = 2/y).a. Derive his demand functions for x and y. Are they homogeneous inincome and prices?b. Assuming I = $60 and px = $1, graph his demand curve for y.c. Repeat part (b) for the case in which p = $2.

It is given that:U = ln x + 2ln ya) Given MUx = 1/x and MUy = 2/y, it is known that,

1. Suppose David spends his income (I) on two goods, x and y, whose market prices are pr and py, respectively. His preferences are represented by the utility function u(x, y) =lnx+2lny (MU₂=1/x, MUy = 2/y). a. Derive his demand functions for x and y. Are they homogeneous in income and prices? b. Assuming I = $60 and pz = $1, graph his demand curve for y. c. Repeat part (b) for the case in which p₁ = $2.

1. Suppose David spends his income (I) on two goods, x and y, whose market prices are pr and py, respectively. His preferences are represented by the utility function u(x, y) =lnx+2lny (MU₂=1/x, MUy = 2/y). a. Derive his demand functions for x and y. Are they homogeneous in income and prices? b. Assuming I = $60 and pz = $1, graph his demand curve for y. c. Repeat part (b) for the case in which p₁ = $2.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter10: Consumer Choice Theory

Section: Chapter Questions

Problem 6P

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