1. Ivan has the following utility function U(x,y) = ln(x) + y where x represents food and y represents other goods. Ivan has 10 to spend on these two goods. Suppose that the initial price of x (P_x) is 1 per unit, and that of y (P_y) is 1 per unit.

(i) What is the Marginal Rate of Substitution at the point X = 10, Y = 10? What is Ivan's optimal bundle? Note that MU_x = 1/x and MU_y=1. (10 marks)

(ii) Explain the method above for finding out Ivan's optimal consumption bundle. To do that, consider what happens when the consumption choice changes. (10 marks)