Problem
Kunal's utility for goods x and y is given by U(X, Y) = a ln(X) + b ln(Y), where a > 0, b > 0, and ln(X) and ln(Y) represent the natural logarithm of X and Y respectively. His money income is M, and the prices of good X is PX, and price of good Y is PY.
1. Derive the demand functions for good X and good Y (in terms of income and price). Make sure to show the steps by which you arrive at the answer.
2. Are these two goods X and Y complements or substitutes? Explain your answer.
3. Are these two goods X and Y normal or inferior? Explain your answer.