Carly, an intelligent albino guinea pig consumes only two goods: greens and hay. Her preferences are represented by the utility function U(x,y)=x-x2/2+y, where x is her consumption of greens, and y is her consumption of hay. Carly always maximizes her utility subject to her budget constraint. Carly has an income of $m and she is allowed to spend as she wishes on greens and hay. The price of hay is always $1 and the price of greens is Px.

a. What is Carly's inverse demand function for greens?

b. Suppose that Carly's daily income is $3 and that the price of greens is $0.50. What is her optimal bundle?

c. What bundle would she buy if the price of greens rose to $1?

d. How much money would Carly be willing to pay to avoid having the price of greens rise to $1? What is this called?

e. Suppose the price of greens rose to $1. How much extra money would you have to pay Carly to make her as well-off as she was at the old prices? What is this called?

f. At the price of $0.50 and income of $3, how much (net) consumer's surplus is Carly getting?

g. What type of preference does Carly have?

*****Avoid hand written solution