Ronald consumes two goods, X and Y. He has a utility function given by the expression: U = 2X0.5Y0.5.

So, MUX = (Y0.5) / (X0.5) and MUY = (X0.5) / (Y0.5). The current prices of X and Y are 20 and 80, respectively. Ronald currently has an income of 640 per time period.

a. Calculate the optimal quantities of X and Y that Ronald should choose, given his budget constraint. Show your work. b. Holding Ronald’s income and PY constant at $640 and $80 respectively, find out the equation for Ronald’s demand curve for X. Show your work.

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