1. Solve the following questions:

a) How does the marginal rate of substitution relate to the marginal utility of X and Y? Assume that the utility generated by the last euro Mr. Blue spends on X is greater than that generated by the last euro he spends on Y. How can you prove that Blue is not buying the best feasible bundle?

b) Your utility function is U=X2Y. Your income is 600$, the price of one unit of X is 20$ and the price of one unit of Y is 5$. Draw the budget constraint and determine your best feasible bundle algebraically.