Problem
Suzie purchases two goods, food and clothing. She has the utility function U(x, y) xy, where x denotes the amount of food consumed and y the amount of clothing. The marginal utilities for this utility function are MUx = y and MUy = x.
a) Show that the equation for her demand curve for clothing is y I/(2Py).
b) Is clothing a normal good? Draw her demand curve for clothing when the level of income is I = 200. Label this demand curve D1. Draw the demand curve when I = 300 and label this demand curve D2.
c) What can be said about the cross-price elasticity of demand of food with respect to the price of clothing?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.