Suppose david spends his income i on two goods x and y, Business Economics

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Suppose david spends his income i on two goods x and y

Suppose David spends his income (I) on two goods, x and y, whose market prices are px and py, respectively. His preferences are represented by the utility function u(x, y) = lnx + 2lny (MUx = 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 px = $1, graph his demand curve for y.

c. Repeat part (b) for the case in which px = $2.

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Business Economics: Suppose david spends his income i on two goods x and y

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Business Economics: Suppose david spends his income i on two goods x and y

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