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For problems 1, 2, 3, we consider an agent Ann who consumes goods r and y and has a utility U(x, y) = ry. In
For problems 1, 2, 3, we consider an agent Ann who consumes goods r and y and has a utility U(x, y) = ry. In these problems, Good r costs Pr and good y costs Py. (1) 25 Marks Ann has I to spend. (a) Write out Ann's utility maximization problem. (b) Find: MUz, MUy, and MRSry. (c) Write out Ann's tangency condition. What is the other equation needed to solve for Ann's demand? (d) Find Ann's demands for a and y as functions of Pr, Py, and I. (Partial credit if you do this only for / = 30, Pz = 5 and Py = 2.)
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