Question

Desire the income offer curves and engel curves for commodity x for the following utility functions , assuming Px=Py=1. a) u(x,y) = max(2x,3y). b) u(x,y)= x-y

Answer 1

a) income offer curve and engel curve for u(x,y) = max(2x,3y)

Commodity x is a normal good,hence the curves will be as shown below:

b) income offer curve and engel curve for u(x,y) = x-y

Commodity x is a substitute good,hence the curves will be as shown below