Question
An individual has preferences over two goods (XandY) from which they must choose. These preferences are represented by the utility functionU=X1/2Y1/2. The individual is given
An individual has preferences over two goods (XandY) from which they must choose. These preferences are represented by the utility functionU=X1/2Y1/2. The individual is given an income ofI, and faces pricesPXandPYfor the respective goods.
(a) List the exogenous and endogenous variables.
(b) The consumer'sMRSX,Y=Y/X.Use this information to find this individual'sdemand
functionsforXandY.
(c) Find this individual's income elasticity of demand for goodX("X,I).
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Managerial Economics A Problem-Solving Approach
Authors: Luke M. Froeb, Brain T. Mccann
2nd Edition
B00BTM8FK0
