Question

4. If an individual's utility function for coffee (x) and cream (y) is given by U(x, y) = min (x, 5y), write the demand function for coffee .

Answer 1

7. Assume x and y are the only two goods a person consumes. If after a rise in pX the quantity demanded of y increases. Evaluate the following as true or false and explain. Support your explanation with a graph.

The income effect dominates the substitution effect for good y.