What is soroush income elasticity of demand for good

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Let’s explore the quasilinear utility function in more detail. Earlier in the semester, we stated that quasilinear utility functions can be especially relevant when we’re examining a good that constitutes a small part of an individual’s income. Assume Soroush has the utility function U(x1,x2)=2x1^(1/2)+x2 A. Find Soroush’s demand functions for Good 1 and Good 2. B. What is Soroush’s income elasticity of demand for Good 1? C. What is Soroush’s income elasticity of demand for Good 2? D. Using your own experiences, in a paragraph or less explain why your results from parts B and C are consistent with one of the goods being a low-priced good and one of the goods being an aggregate good that incorporates “everything else on which you would spend money”? Make sure to note which of the goods is the low-priced good, and why your results from B and C justify your claim.

Reference no: EM13149777

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