Are goods and substitutes or completanol Expen. 03:_ (10 palnts) Consider the following consumer's problem: UXY = 3X + 2Y. Prices are B- $5, Px = $10 and Income is m=$500. a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possible consumptions of X and Y? b) Show that the MRSxy=-3/2. c) Sketch the indifference curves onto the budget set and show that given these prices, optimal consumption implies Y=0. d) Find the consumer's optimal consumption bundle (X,Y*) given these prices and income. e) How high would the price of X have rise for the consumer to choose Y>0? Explain. Are goods X and Y substitutes or complements? Explain.
