1) Suppose we have the following utility function: U(x,y)= x.1 y.9.
a. What is the marginal utility of x? What is the marginal utility of y? What is the marginal rate of substitution?
b. Suppose you have $200 to spend and the price of x is $1, and the price of y is $2. Draw the budget constraint.
c) Using the budget constraint from part c, calculate the optimal level of x and y and show it on the budget constraint. Draw the indifference curve and budget.