Concept explainers
(a)
To derive: the demand curve for x and to verify that demand for x is independent of the level of income at an interior optimum.
Explanation of Solution
The quasi-linear utility function is of form:
Prices are given to be Px and Py.
Now,
It can be seen from the demand curve of x, that the demand for x is independent of level of income of the consumer.
(b)
To derive: the demand curve for y and analyze whether y is a normal good.
Explanation of Solution
The equation of the budget line can be written as:
For analyzing whether y is a normal good, differentiating y with respect to income,
Now, differentiating y with respect to Px,
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Chapter 5 Solutions
EBK MICROECONOMICS
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc