Consider two individuals A and B, both of whom have preferences defined over two goods x and y: U(x, y) = -1/2(1-x)^2 - 1/2 (1-y)^2

Assume that Px = Py = 1.

a. Suppose that individual A has an income of $2 and individual B has an income of $0.50. Set up and solve both (UMP]s. What is each individual's optimal consumption bundle?
b. Compare the marginal utilities of each good between individuals A and B at the optimal bundle. Is either individual satiated? What implications does this have for their marginal utilities of income? Explain.

1. all other things equal, according to the law of demand, when the price of a good falls, the demand for the good falls the demand for the good rises the quantity demanded of the good falls the quantity demanded of the good rises 2. when a market is in equilibrium, the quantity of the good that buyers are willing and able to buy exactly equals the quantity that sellers are willing and able to sell cannot be determined is less than the quantity that sellers are willing and able to sell is greater than the quantity that sellers are willing and able to sell 3. which of the following factors does not influence the demand for a good or service? consumer (buyer) income the price of related goods the number of sellers buyer expectations 4. when the number of sellers in a market increases, demand rises supply rises the price rises, all else equal the number of buyers falls