A consumer has utility (see image) on ice creams (x) and cakes (y). (a) Are the indifference curves bowed towards the origin? (b) Derive his demand function (as a function of prices px, py and budget I) for ice cream (x). (c)(Looking at the demand function you found in (b), Is ice cream a normal good? Are ice cream and cakes substitutes or complements? Calculate the income elasticity of market demand at the point px = 2, py = 1 and I = 12.
A consumer has utility (see image) on ice creams (x) and cakes (y). (a) Are the indifference curves bowed towards the origin? (b) Derive his demand function (as a function of prices px, py and budget I) for ice cream (x). (c)(Looking at the demand function you found in (b), Is ice cream a normal good? Are ice cream and cakes substitutes or complements? Calculate the income elasticity of market demand at the point px = 2, py = 1 and I = 12.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A consumer has utility (see image) on ice creams (x) and cakes (y).
(a) Are the indifference
(b) Derive his
(c)(Looking at the demand function you found in (b), Is ice cream a normal good? Are ice cream and cakes substitutes or complements? Calculate the income elasticity of market demand at the point px = 2, py = 1 and I = 12.
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