Sally Consumes Two Goods, X and Y

question 29

Essay

Sally consumes two goods, X and Y. Her utility function is given by the expression
U(X,Y)= X^0.4Y^0.6 . The current market price of X is $20 per unit, while the market price of Y is $100 per unit. Sally's current income is $10,000.
a)Calculate Sally's demand for X as a function of prices and incomes. Is good X normal?
b)How much X and Y will Sally demand at current market prices? What will Sally's utility be with that consumption?
c)Find the income elasticity and the price elasticity of demand for X.

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Definitions:

Personality Traits

Enduring characteristics or behaviors that distinguish one individual from another, often described as patterns of thought, feeling, and behavior.

Superego

Part of the human psyche, according to Freudian theory, that represents internalized ideals and provides standards for judgment (the conscience) and for future aspirations.

Collective Unconscious

A concept proposed by Carl Jung that refers to the part of the unconscious mind which is derived from ancestral memory and experience and is common to all humankind.

Personal Unconscious

A component of Jung’s analytical psychology, referring to all information that is present within an individual's mind, but not readily accessible to immediate consciousness.