Question: Consider Kuhn with the utility function, =()^1/2. Let x and y be the prices of goods and respectively and be income. Suppose that Kuhn buys

Consider Kuhn with the utility function, =()^1/2. Let x and y be the prices of goods and respectively and be income.

Suppose that Kuhn buys good from a store that offers him the following deal: buy units, get units free, where > 0.

(a) Find an expression for Kuhn's optimal consumption of good as a function of x, y, and .

(b) Using the function in (a), intuitively explain why a seller of good will offer the deal above.

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