Question: charlotte spends her income of 2400 on clothing good x...
Charlotte spends her income of $2400 on clothing (good x), and the composite good (good y). The utility Charlotte receives from consuming a basket of clothing and the composite good is
U(x,y) = 2√x + (y/300)
The corresponding marginal utilities are
MUx = 1/√x and MUy = 1/300
Question: Find the income and substitution effects for the price increase. Is clothing a normal good?