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A consumer purchases two goods, x and y and has utility function U(x; y) = x y. For this utility function MUx=y and MUy= x.

A consumer purchases two goods, x and y and has utility function U(x; y) = x y. For this utility function MUx=y and MUy= x. The price of x is px= 2 and the price of y is py= 4. The consumer has M units of income to spend on the two goods and wishes to maximize utility, given the budget.

  1. Starting from x=20, y=15 with M=100, would this consumer increase their satisfaction by increasing their consumption of x (and decreasing y) or decreasing their consumption of x (an increasing y)? Explain.

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