1. [20 marks] Kobby has the utility function, U = 10X0.4Y 0.6. Denote his income by I > 0 and the prices of goods X and Y by Px > 0 and Py > 0.

(a) Derive Kobby's expenditure function.

(b) Suppose Kobby has an income I = $100 and that goods X and Y are sold on the market at Px = $2 and Py = $1. However, Kobby is member of a store called Slutsky Ltd that sells good X at a price of $1 and he pays a membership fee of $10. What is the minimum amount of money he is willing to accept to give up his membership of Slutsky Ltd?