Question

Suppose a consumer has the utility function U(x1,x2)=x1^2+x2.

(a) Are the commodities goods, bads, or neutrals?

(b) Are the commodities complements or substitutes?

(c) Are the commodities normal?

Answer 1

a) Both the commodities are goods (1:2), (4 :4), ( 9:6,) ( 16 : 8.)... and so on.

b) As they show positive relationship they are complimentary goods.

c) yes, the commodities are Normal goods. as their consumption increases when income of consumer increases.