Suppose that there are two goods, X and Y. The utility function is U = X²Y². The price of X is P, and the price of Y is $50. Income is $600. The demand for X as a function of P is X = ____.

Question

Quizplus · Accepted Answer

The demand for X can be derived from the utility function and the budget constraint. Given the income of $600 and the price of Y being $50, if we allocate all income to purchasing X, the demand function for X would be the amount of money available ($600) divided by the price of X (P), which simplifies to 600/P. However, without the specific utility function's details being correctly interpretable due to the formatting, and based on standard economic theory, the correct choice among the provided options that represents a demand function for a good in relation to its price (P) is A) 300/P, assuming a portion of the income is allocated to X and the rest to Y, or that the utility function leads to this simplified demand function for X. This choice reflects the inverse relationship between price and quantity demanded, a fundamental principle in economics.

Suppose That There Are Two Goods, X and Y