Assume Hailey's Utility Function is U = x^2 y . The price of X is $8 per unit and the price of Y is $2 per unit. Her income is currently $240 / month.
A) Determine her utility maximizing quantities of x and y.
B) Suppose the price of X goes down to $4 per unit. Determine her new utility maxmimizing quantities of x and y
C) Draw a graph of the utility maximizing quanitites using Indifference Curves and Budget Lines. Label the price consumption curve.
D) You now have two points on Hailey's demand curve for x. Draw and label the demand curve. What is the elasticity of demand over this range of the demand curve?
Using the same utility function as in Question 3 and part a.
A) Suppose her income increases to $360 / month. Determine her new utility maximizing quanitites of x and y
B) Draw a graph of the utility maximizing quantities using Indifference Curves and Budget Lines. Label the income consumption curve.
C) You now have two points on Haileys Engel Curve for x. Draw and label the Engel Curve. What is the income elasticity of demand over this range of the curve?