A consumer with I dollars budget has the utility u(x,y) = x(y+1) over amounts of cake (x) and ice cream (y) she consumes. The prices are px , py respectively.

(a) Derive her demand for cake (x), as a function of prices px , py and her budget I.

(b) Looking at the demand function in (a), is cake a normal good or an inferior good? Are cake and ice cream complements or substitutes?

(c) Calculate the (i) (own) price, (ii) income, (iii) cross- price elasticity of demand for cake at the point where I = 80, px =10, py = 20.