# 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

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) = xy, with associated marginal utilities. His income is $120.

a) Calculate his optimal basket when Px = 4 and Py = 1.

b) …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) …