2. Economics
3. suppose james derives utility from two goods xy characterised by...

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

###### Question details

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?