Suppose Maria spends his income (I) on two goods, x and y, whose market prices are px and py, respectively. His preferences are represented by the utility function u(x, y) = xy2 (MUx = y 2 , MUy = 2xy). (a) Derive her demand functions x(I, px, py) and y(I, px, py). (b) Assuming px = $2 and py = $1, graph his Engel curve for y. (c) Assuming I = $60 and py = $1, graph his demand curve for x. (d) On the same graph repeat part (c) for the case in which I = $90.

Q&A Education