Suppose the consumer's utility function is given by $\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \mathrm { xy } + \mathrm { y }$ where $\mathrm { MU } _ { \mathrm { x } } = \mathrm { y } \quad \mathrm { MU } _ { \mathrm { y } } = \mathrm { x } + 1$
The equation for this consumer's demand curve for $x$ when $\mathrm { I }

Question

Suppose the consumer's utility function is given by $\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \mathrm { xy } + \mathrm { y }$ where $\mathrm { MU } _ { \mathrm { x } } = \mathrm { y } \quad \mathrm { MU } _ { \mathrm { y } } = \mathrm { x } + 1$
The equation for this consumer's demand curve for $x$ when $\mathrm { I } < \mathrm { P } _ { \mathrm { x } }$ is:
A) $x ^ { d } = 0$
B) $\mathrm { x } ^ { \mathrm { d } } = \frac { 1 } { 2 P _ { x } }$
C) $x ^ { \mathrm { d } } = \frac { 1 } { 2 P _ { x } } - \frac { 1 } { 2 }$
D) $x ^ { d } = 1 / 2$

Quizplus · Accepted Answer

The condition $\mathrm { I } < \mathrm { P } _ { \mathrm { x }}$ implies that the consumer's income ($I$) is less than the price of good $x$ ($P_x$), making it impossible for the consumer to afford even one unit of $x$, hence $x^d = 0$.

Suppose the Consumer's Utility Function Is Given By U(x,y)=xy+y\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \mathrm { xy } + \mathrm { y }U(x,y)=xy+y

Suppose the Consumer's Utility Function Is Given By $\mathrm { U } ( \mathrm { x } , \mathrm { y } ) = \mathrm { xy } + \mathrm { y }$