Consumer preference: u = x + lny Watch

Door
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I can't seem to get this question.

I got part (a) as MRS = y

And I THINK I have a demand function for x for part (b) but am unsure where to go from there. Any help would be REALLY appreciated.

Many thanks.
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Door
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Anyone??
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Deshi
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What level is this? (first year?)
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Door
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(Original post by Deshi)
What level is this? (first year?)
Second year...Intermediate micro
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Swayum
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Aren't you missing a budget constraint? Also, what do they mean by I <= and I > ? Is I income?

Without more information, I'd guess they want you to say

income = px + y (price of y is normalised to 1 and p = price of good x in terms of y)

So the slope of the budget constraint would be -p.

Can you see what to do next?
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Door
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(Original post by Swayum)
Aren't you missing a budget constraint? Also, what do they mean by I <= and I > ? Is I income?

Without more information, I'd guess they want you to say

income = px + y (price of y is normalised to 1 and p = price of good x in terms of y)

So the slope of the budget constraint would be -p.

Can you see what to do next?
Hi, thanks for the reply.

Well let me show you what I had done for the X demand function:

PxX + PyY = I

I re-arranged

X = I/Px - Py/Px . Y

and substituted the MRS = price ratio (with MRS=Y and with price ratio= Px/Py)

X = I/Px - Py/Px . Px/Py

and finally ended up with:

X = I/Px - 1

This makes sense for I > Px

And then it also makes sense to say X = 0 for I<= Px

But this leaves me stumped for what to do for the Y demand function.
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Alessandro_22
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this is a royal holloway past paper right, i know how to do this
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Door
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(Original post by Alessandro_22)
this is a royal holloway past paper right, i know how to do this
Yeah I think the Y demand function is simply Y = Px / Py
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