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Question: suppose james derives utility from two goods xy characterised by...

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Suppose James derives utility from two goods {x,y}, characterised by the following utility function: $u(x, y) = 2sqrt{x} + y$: his wealth is w = 10 let py = 1:

(a) What is his optimal basket if px = 0.50? What is her utility?

(b) What is his optimal basket and utility if px = 0.20?

(c) Find the substitution effect and the income effect associated with the price change.

(d) What is the change in consumer surplus?

Suppose Linda has the following preferences over goods and y: Her wealth is w-10 let py-1. (a) What is her optimal basket if 0.50? What is her utility? (b) What is her optimal basket and utility if p 0.20? (c) Find the substitution effect and the income effect associated with the price change (d) What is the change in consumer surplus?

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