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Question: 3 a consumers utility function is u x025y07s where x...

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3. A consumers utility function is: u x025y0.7s where x and y are two goods () Suppose total income is £10,000 and the prices of the two goods are £4 and £6 respectively. Use constrained optimisation to find the consumers demand for both goods. Now replace the price of the second good with p. Find a formula for the consumers demand for this good. Draw the demand curve and comment on its properties (ii) (ii) What is the own-price elasticity of demand for the first good? (iv) (v) What happens to the demand for the first good if income rises to £12,000? What can you say about the income elasticity of demand for the first good?
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