Question 3 Consumers have preferences over two goods :3 and y denoted by 1;.(32, y) = a: + Ay y2 The price of good :1: is one and good y is p. All consumers have income M. Consumers have decision utility with A = 2 and experience utility with A = 1. A monopolist supplies good y with marginal cost 0.5. Experience utility captures the welfare of consumers. In what follows, concentrate on cases where consumers have enough income so that there is an interior solution. is. they consume positive amounts of both goods. (8) (b) (C) (d) Derive the demand function for good y. [4 marks] Derive the monopoly and competitive prices and demands. [4 marks] ls consumer utility higher or lower with monopoly or competition? Explain. [12 marks] What other considerations might be relevant in deciding whether monopoly or competition is welfare superior in this example? [5 marks]