Suppose Pacó has an annual entertainment budget of I. He spends his entertainment budget on only 2 goods: video games and movies. The price of a video game is P, and the price of a movie is Pm. Paco's utility function for video games (v) and movies (m) is: U(v, m) = 4vim. a. Derive Paco's demand functions for video games and movies as functions of only exogenous variables. b. Write Paco's indirect utility function.

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Form Utility

The term utility in general refers to the satisfaction earned from usage of a particular product or service. Utility always plays an important role because it influences various important elements like demand & thereby the price of the good or service as well. Though utility is not easy to measure, various types of economic models can be used indirectly. There can be various types of utilities like economic utility, marginal utility, cardinal utility, form utility.