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Cross-price elasticity of demand of food

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Suzie purchases two goods, food and clothing. She has the utility function U(x, y) = xy, where x denotes the amount of food consumed and y the amount of clothing. The marginal utilities for this utility function are MUx = y and MUy = x.

a. Show that the equation for her demand curve for clothing is y = I/(2Py).

b. Is clothing a normal good? Draw her demand curve for clothing when the level of income is I = 200. Label this demand curve D1. Draw the demand curve when I = 300 and label this demand curve D2.

c. What can be said about the cross-price elasticity of demand of food with respect to the price of clothing?

Reference no: EM133130820

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