Max has the utility function U (x1,x2) = x1 (x2 + 1).

1. Suppose that the price of commodity one is p1, the price of commodity two is p2, and Max has an income of y. Find the Marshallian demand functions (or correspondences) for each commodity for Max.
2. Suppose that the price of commodity one is $2, the price of commodity two is $1, and Max has an income of $10. How much of commodity one does Max demand? How much of commodity two? If his income doubles and prices stay unchanged, will his demand for both commodities double?

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1 At equation in utility maximization MRS p1p2 MRS ... View the full answer