Question: Consider a consumer with utility function U ( x , y ) = 2 xy . Her income is I = 1 5 , and

Consider a consumer with utility function U(x, y)=2xy. Her income is I =15, and prices are given by px =2, and py =3. Address the following questions: a) Find the demand functions. b) Find the optimal bundle. c) Find the price elasticity of good y Assume the price of good x increases up to px =3. d) Find the income effect, the substitution effect and the total effect. e) Determine whether the good x is normal or inferior f) Determine whether the good x is a Giffen good g) Are goods x and y substitutes, complements, or independent goods?

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