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3 Price elasticity and cross price elasticity of demand Suppose an individual who derives utility u(x, y) from consuming a units of good X and y units of good Y. Prices of goods X and Y are respectively pr = 1 and py = p. Furthermore, the individual has a budget m. u(x, y) takes the following form: u(x, y) = ry, a > 0 and B > 0. (A) Derive the demands for goods X and Y. (2 Points) (B) Compute the price elasticity of demand for good Y. (1 Point) (C) Compute the cross price elasticity of good X for a change in p. (1 Point) (D) Compute the income elasticity of good X. Is it a normal good? (2 Points)