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Jasina has preferences for two goods x, y and her marginal rate of substitution (MRS) between...

Jasina has preferences for two goods x, y and her marginal rate of substitution (MRS) between x and y is given by 3y/x. Her budget constraint takes the form m ≥ pxx + pyy, where m is income and px, py are the prices of x, y respectively. (Word limit per question: 400 words (200 words per part of question).

(a) Someone says that Jasina’s expenditure on y (i.e., pyy) is always one third of her expenditure on x (i.e., pxx). Is this correct? Are x and y normal goods?

(b) Jason has different preferences to Jasina: his marginal rate of substitution (MRS) between x and y is equal to 3 for all x, y > 0. Jason’s budget constraint is the same as Jasina’s. What can you say about Jason’s demands for x, y?

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