Mu2 Week 2 Research Paper

Satisfactory Essays
purchases two goods, clothing and food. She has the utility function U(x,y) = x,y, where x denotes the amount of clothing consumed and y the amount of food. Her marginal utilities are MUx = y and MUy = x. Now suppose that she has an income of RM72 per week. The price of food is Py = RM1 per unit and the price of clothing is Px = RM9 per unit. If the price of clothing decreases to RM4: a. Find the numerical values of the income and substitution effects on clothing consumption. b. Graph the result.
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