Exercise 2 (Individual Demand) Bertolt has utility function u(x, y) = xy + 40y, find the demand function for the first good, D(p), when q = 10 and m = 400. Exercise 3 (Comparing Consumers based on their MRS) Charlotte and Daniel both have prefer- ences over the same two goods, which exhibit smooth indifference curves and strictly diminishing marginal rate of substitution. Charlotte and Daniel face the same budget, m. at each bundle (x, y), Charlotte's MRS, MRSc(x, y), is strictly greater than Daniel's MRS, MRSD(x, y) at the same bundle. 1. If Charlotte chooses to spend her entire budget on the second good and does not buy any of the first good, what does Daniel choose? 2. If Daniel chooses to spend his entire budget on the first good and does not buy any units of the second good, what does Charlotte choose? 3. If both choose interior bundles, how does Charlotte's optimal bundle (xt, yt) compare to Daniel's (2 3, yb )? Exercise 4 (ICC, PCC, and Demand) For utility function u(x, y) = x(y + 4), find the 1. Income Consumption Curve when prices are p = 10 and q = 5. 2. Price Consumption Curve when income is m = 100 and the second good has price q = 5. 3. Demand Function for the first good, x(p), when m = 100 and q = 5 (you may use your results from the previous parts)