There are two consumers on the market: Jim and Donna. Jim's utility function is U(x, y) = xy, with associated marginal utility functions MUx = y and MUy = x. Donna's utility function is U(x,y) = x2y, with associated marginal utility functions MUx = 2xy and MUy = x2. Income of Jim is IJ = 100 and income of Donna is ID = 150.
a) Find optimal baskets of Jim and Donna when price of y is Py = 1 and price of x is P.
b) On separate graphs plot Jim's and Donna's demand schedule for x for all values of P.
c) Compute and plot aggregate demand when Jim and Donna are the only consumers.
d) Plot aggregate demand when there is one more consumer that has identical utility function and income as Donna.