# Amy loves fancy and fashionable outfits. She never wears an outfit twice. She has a… 1 answer below »

Amy loves fancy and fashionable outfits. She never wears an outfit twice. She has a utility function takes the form U(x, y) = x 1/2 y 1/2 = vxy, where x stands for the number of “new outfits” and y is the amount of “Other goods” essential to her living. That is to say, Amy’s marginal utilities for new outfit and other goods are: MUx = 1 2 r y x ; MUy = 1 2 rx y , respectively. Amy recently noticed that one of her favourite brand “Supreme” is offering a deal on its’ latest patchwork hooded jackets, which is sold at \$100 a piece. The promotion claims that one can “get the second piece 50% off.” It means, if Amy buys a jacket from Supreme Page 2 of 10 MAE201: Competition and Industry Trimester 1 2020 Individual Assignment for \$100, she can buy the second jacket (of different colour) for 50% of the original tag price, \$50. In addition, if Amy wants a third jacket, she has to pay \$100 again, but now she has the privilege to purchase the fourth jacket for \$50, etc. Assume the price for “Other goods” is \$50 and Amy has a monthly income of \$1,000 to spend on both the Supreme

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