Determine gingers optimal basket given prices and income

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Ginger's utility function is U(x, y) = x2y, with associated marginal utility functions MUx = 2xy and MUy = x2. She has income I = 240 and faces prices Px = $8 and Py = $2.

a) Determine Ginger's optimal basket given these prices and her income.

b) If the price of y increases to $8 and Ginger's income is unchanged, what must the price of x fall to in order for her to be exactly as well off as before the change in Py?

Reference no: EM13236946

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