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Tom spends all his $100 weekly income on two goods, X and Y. His utility function...

Tom spends all his $100 weekly income on two goods, X and Y. His utility function is given by U(X,Y) =XY. If Px=4 and Py=10

a) how much of each good should the buy? Please show graphically (specify clearly x-axis and y-axis and intercepts of each axis)

b) Same as Problem 1, except now Tom’s utility function is given by U(X,Y) = X^1/2 Y^1/2

c) Find the MRS at the tangent points (optimal point) in a and b.

Can you explain what does it mean by MRS in each point?

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