David has a quasi-linear utility function of the form U(x, y) = x + y, with associated

Question:

David has a quasi-linear utility function of the form U(x, y) = √x + y, with associated marginal utility functions MUx = 1/(2√x) and MUy = 1.
a) Derive David's demand curve for x as a function of the prices, Px and Py. Verify that the demand for x is independent of the level of income at an interior optimum.
b) Derive David's demand curve for y. Is y a normal good? What happens to the demand for y as Px increases?
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Microeconomics

ISBN: 978-0073375854

2nd edition

Authors: Douglas Bernheim, Michael Whinston

Question Posted: