Hi guys,

Once again im stuck with answering this question. Any kind of help would be much appreciated

Question:

David is confused. He has a limited income that he must allocate between his two favourite goods, A and B. David’s utility function for these goods is given by:

U(A,B)=4A+4B.

The price of good A is currently $6 and the price of B is currently $4.

a) David’s income is equal to $36. How much of A and B will he consume? Explain and carefully demonstrate David’s optimal choice on a graph.

b) Suppose that price of good B increases from $4 to $5. What is the total effect of this price change on Davis’s demand for goods A and B? What are the corresponding income and substitution effects? Explain and demonstrate your answer on a graph

Thanks heaps guys!