# Calculate his optimal basket when Px = 4 and Py = 1

Lou’s preferences over pizza (x) and other goods (y) are given by U(x, y) = xy, with associated marginal utilities. His income is \$120.
a) Calculate his optimal basket when Px = 4 and Py = 1.
b) Calculate his income and substitution effects of a decrease in the price of food to \$3

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Calculate his optimal basket when Px = 4 and Py = 1

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### Lou’s preferences over pizza (x) and other goods (y) are given by U(x, y)

Lou’s preferences over pizza (x) and other goods (y) are given by U(x, y) = xy, with associated marginal utilities. His income is \$120.
a) Calculate his optimal basket when Px = 4 and Py = 1.

b) …

• Not rated

### Lou’s preferences over pizza (x) and other goods (y) are given by U(x, y) = xy, with associated

Lou’s preferences over pizza (x) and other goods (y) are given by U(x, y) = xy, with associated marginal utilities. His income is \$120.
a) Calculate his optimal basket when Px = 4 and Py = 1.

b) …