Question: A consumer buys two goods, good X and a composite good Y. The utility function is given as U(X,Y)= In3XY. The price of X

A consumer buys two goods, good X and a composite good Y.

A consumer buys two goods, good X and a composite good Y. The utility function is given as U(X,Y)= In3XY. The price of X is Px, the price of Y is Py and Income is I. 1) Derive the demand equation for good X. (5 marks) 2) Are the two goods X and Y complements or substitutes? Why? (5 marks) 3) Suppose that I-$10 and suppose that initially the Px = $1 and subsequently Px falls and becomes $0.5 per unit. Calculate numerically the value the price effect as a result of the drop in Px and graph the results. (5 marks)

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