6.1 Heidi receives utility from two goods, goats milk (M ) and strudel (S ), according to...

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6.1 Heidi receives utility from two goods, goat’s milk (M ) and strudel (S ), according to the utility function U(M, S)  M  S.

a. Show that increases in the price of goat’s milk will not affect the quantity of strudel Heidi buys—that is, show that S/PM  0.

b. Show also that M/PS  0

c. Use the Slutsky equation and the symmetry of net substitution effects to prove that the income effects involved with the derivatives in parts a and b are identical.

d. Prove part c explicitly using the Marshallian demand functions for M and S.

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