Question: Consider the utility function u (x, y ) = x + ln y with budget constraint p x x + p y y = I

Consider the utility function u(x,y) = x+ lny

with budget constraint pxx + pyy = I.

Remark: You must consider the possibility of corner solutions in answering the following questions

Find the consumer's Marshallian demand functions for xand y.

  1. Find the own-price elasticities, income elasticities, and cross-price elasticities for both xand y. Is it possible for xto be an inferior good? What about y?
  2. Find the consumer's indirect utility function.

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