Suppose That There Are Two Goods, X and Y

question 33

Multiple Choice

Suppose that there are two goods, X and Y. The utility function is U = XY + 2Y. The price of X is $5, and the price of Y is P. Income is $60. The demand for Y as a function of P is X = ____.

• A) 350/P
• B) 35/P
• C) 20/P
• D) 2P

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Definitions:

Substitutes

Substitutes are goods or services that can be used in place of each other, fulfilling the same needs or desires of the consumer.

Price Inelastic

A situation where the demand or supply for a product does not change significantly when its price changes.

Good X

A placeholder term used in economics to represent a specific product or commodity in theoretical discussions.

Midpoint Method

A technique used in economics to calculate the elasticity of demand or supply by using the midpoint between two points on a curve instead of relying on the initial or final point alone.