Sarah has the following utility function: u(x, y) = 10x + 12y. (a) Find Sarah's Marshallian demands. (b) Find Sarah's Hicksian demands. Consider that income is I = 20, and prices are given as pz = 5, Py = 4. (c) Does Sarah have enough money to attain a utility level of 70? Justify your answer.

Advanced Engineering Mathematics
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Chapter2: Second-order Linear Odes
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Sarah has the following utility function: u(x, y) = 10x + 12y.
(a) Find Sarah's Marshallian demands.
(b) Find Sarah's Hicksian demands.
Consider that income is I = 20, and prices are given as pr = 5, Py = 4.
(c) Does Sarah have enough money to attain a utility level of 70? Justify your answer.
(d) Assume the price of y marginally increases. Find the total, income and substitution
effect for x due to the change in py.
1
(e) Assume the price of y increases to p
=
7. Find the total, income and substitution
effects for x. Consider this price change a "large" price change.
(f) Compare the answers of the last two questions.
Transcribed Image Text:Sarah has the following utility function: u(x, y) = 10x + 12y. (a) Find Sarah's Marshallian demands. (b) Find Sarah's Hicksian demands. Consider that income is I = 20, and prices are given as pr = 5, Py = 4. (c) Does Sarah have enough money to attain a utility level of 70? Justify your answer. (d) Assume the price of y marginally increases. Find the total, income and substitution effect for x due to the change in py. 1 (e) Assume the price of y increases to p = 7. Find the total, income and substitution effects for x. Consider this price change a "large" price change. (f) Compare the answers of the last two questions.
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