Jose gets utility from the goods he consumes and also the income ...

[kellyjaisingh]

Jose gets utility from the goods he consumes and also the income he earns. His utility function is given by U(q1,q2 ) = q1q2Y Derive Jose's demand equations.
 
  Does the fact that he derives utility directly from income affect his consumption in this case?

Question 2

An investment is profitable as long as its internal rate of return is equal to the rate of interest.
 
  Indicate whether the statement is true or false

[milbourne11]

Answer to Question 1

The demand equations are
qi = Y/2pi
because income is a scalar of his utility and not chosen by Jose; it has no influence on his optimal bundle.

Answer to Question 2

False. Such an investment has a profit of zero. The investment is profitable if the internal rate of return exceeds the interest rate.