Suppose Lyle's utility function is U= XY + X + Y, X,Y greater than or equal to 0
a) Derive Lyle's generalized demand function for goods X and Y in terms of Px, Py, and I
Now suppose Px=5, Py=10, I=100
b) Determine the optimal quantities of X and Y that Lyle should purchase as well as the maximum amount of utility he will receive at the optimum
c) Are X and Y normal or inferior goods? Why?
d) Are X and Y substitutes or complements? Why?