Question: Justin has the utility function U = xy , with the marginal utilities MUx = y and MUy = x . The price of x

Justin has the utility function U= xy, with the marginal utilities MUx = yand MUy= x. The price of xis $2, the price of yis py, and his income is 40. When he maximizes utility subject to his budget constraint, he purchases 5 units of y.

  1. What must be the price of yand the amount of xconsumed?
  2. Prove that this allocation follows the equi-marginal principle
  3. What would be the new bundles of x, y if Px was $3

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