Question

An individual utility function is given by U(x,y) = x·y1/2. This individual demand equation for x is a factor a of I/px: x* = a (I/px). In this specific case, factor a is equal to [a]. (NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed.)

Answer 1

U = X.Y.1/2

= Y/2

= X/2

Condition to get X*

MU_x/Px = MU_y/Y

Y/2P_x=X/2P_Y

gives YP_y=XP_x

P_Y=XP_x/Y

I=P_xX+P_yY

putting value of P_y we get

I=XP_x+XP_x

I=2XP_x

X^*=I/2Px

a is 1/2

a=0.5