Petra likes iPhone apps and epresso pods for her coffee machine. We denote the number of apps by X and pods by Y. Prices PX = 10. PY = 5. Her income in the period is 500. Her utility function is given by: (1) U(X,Y) = X^(0.4)Y^(0.6)
(a) How much of X and Y does Petra buy?
(b) The price of X changes. The new price is PX = 5. How much of X does Petra buy now?
(c) Her job requires her to move to another place, Newtown, with different prices. The prices in Newtown are PX N = 5 and PY N = 10. What must her new income be in order for her to buy the same combination of X and Y as in a)?
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