Joel gets utility from board games (B) and earbuds (E). His utility function is U(B,E) = BE + B. The price of board games (B) is PB, and the price of earbuds (PE) is equal to $40. Joel’s income is $200.
(a) Using the Lagrangian method derive Joel’s demand function for board games (B) as a function of PB. (b) Suppose that Joel’s income doubles to $400. Derive Joel’s new demand function for board games (B)as a function of PB. (c) Are board games a normal or inferior good? why?
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