Question: 2. Lily's utility function is U(X,Y)=X Y, where X and Y represent the quantities of the only two goods Lily consumes. The prices of

2. Lily's utility function is U(X,Y)=X Y, where X and Y represent

2. Lily's utility function is U(X,Y)=X Y, where X and Y represent the quantities of the only two goods Lily consumes. The prices of the two goods are px-$2 and py=$6. Lily's income is $1,000 per month. (a) Find the quantities of X and Y Lily would consume in order to maximize her utility. (b) Suppose py goes up to $10. What will now be the utility maximizing quantities of consumption? (c) Find the compensating variation of this price change.

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