What is the price-consumption curve-utility function

Reference no: EM13687632

A consumer has a utility function of U(x,y)=xy+6x+6y

The price of good X is Px, customer income is I, hence constraint is x(Px)+y(Py)=I

1) Use Lagrange method to find demand function of x when I=20

2) Suppose Py=1, and Px can vary, I=20, what is the price-consumption curve?

3) Suppose Py=1, Px=2, customer income can change, what is the income-consumption curve?

4) Suppose I=20, Py=1, Px decreases from 2 to 1, what is the total effect of the price change on demand of x? Decompose the total effect into income and substitution effect.

Reference no: EM13687632

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