Are demand functions homogeneous in income and prices

Reference no: EM13208159

Suppose David spends his income (I) on two goods, x and y, whose market prices are px and py, respectively. His preferences are represented by the utility function u(x,y) = lnx + 2lny (MUx= 1/x; MUy= 2/y).

a. Derive his demand functions for x and y. Are they homogeneous in income and prices?
b. Assuming I = $60 and px = $1, graph his demand curve for y.
c. Repeat part (b) for the case in which px = $2.

Reference no: EM13208159

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