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3 May 2019

Jill buys two goods: X and Y and has the following utility function: U(X,Y) = 2X^0.25Y^0.75

^{Please show all work}

a. Find the equation for her generalized demand curve for X(Px,Py,I)

b. Find the equation for her generalized demand curve for Y(Py,Px,I)

c. Are the above generalized demand functions homogeneous of degree 0? (Show your work)

d. Is X a normal good?

e. Is X a gross substitute or complement to Y?

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Jarrod RobelLv2

5 May 2019

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The generalized demand and supply functions for good X are

Qd = 10 -2Px - 4P_Y + M Qs = 10 + 2P_X

Where:

Q_D = quantity demanded of good X

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P_Y = price of good Y

Q_S = quantity supplied of good X

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e. Find the inverse demand function and the inverse supply function.

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Q_d^Y= 250,000 - 500 P_Y -1.5 M + 240 P_X

where: Q_d^Y = quantity demanded of good Y

P_Y = Price of good Y

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