Question: Max has a utility function U ( x , y ) = 2 xy + 1 . The prices of x and y are both
Max has a utility function Ux yxy The prices of x and y are both $ and Max has an income of $ a How much of each good will he demand? b A tax is placed on x so that x now costs Max $ while his income and the price of y stay the same. How much of good x does he now demand? c Would Max be as well off as he was before the tax if when the tax was imposed, his income rose by an amount equal to $ times the answer to part b
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