Suppose that Sally’s preferences over baskets containing food (good x), and clothing (good y), are described by the utility function U (x, y) = √x + y. Sally’s corresponding marginal utilities are, 1 MUx=2√x and MUy=1. Use Px to represent the price of food, Py to represent the price of clothing, and I to represent Sally’s income.

Question 1: Find Sally’s food demand function, and Sally’s clothing demand function. For the purposes of this question you should assume that I/Py ≥ Py/4Px.

Question 2: Describe the relationship between Sally’s demand for food and, (a) Sally’s income; (b) the price of food; (c) the price of clothing. Your answers should reference the demand function that you derived in question 1, and correctly apply the relevant terminology. You should continue to assume that I/Py ≥ Py/4Px.