Question: Assume a consumer with the utility function U = U (X, Y) = X2 Y2 and the typical budget constraint M = PxX + PyY

Assume a consumer with the utility function

U = U (X, Y) = X2 Y2

and the typical budget constraint

M = PxX + PyY

a. Set up the constrained maximization problem and derive the first-order conditions.

b. Derive the consumer’s demand for X and Y in terms of the parameters.


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