Final answer:
To derive Kevin's demand function for goods x and y, we need to consider his budget constraint. The budget constraint represents the combinations of goods x and y that Kevin can afford given his income and the prices of the goods.
Step-by-step explanation:
To derive Kevin's demand function for goods x and y, we need to consider his budget constraint. The budget constraint represents the combinations of goods x and y that Kevin can afford given his income and the prices of the goods. In this case, the price of good x is $2 and the price of good y is $5, and Kevin has a total income of $120.
The budget constraint equation can be written as:
2x + 5y = 120
where x represents the quantity demanded of good x and y represents the quantity demanded of good y.
To derive Kevin's demand function for x and y, we need to solve the budget constraint equation for x in terms of y and for y in terms of x.
To solve the budget constraint equation for x in terms of y, we can rearrange the equation as:
x = (120 - 5y) / 2
This is Kevin's demand function for good x, which tells us the quantity of good x Kevin will demand at different prices of good y and given his income.
To solve the budget constraint equation for y in terms of x, we can rearrange the equation as:
y = (120 - 2x) / 5
This is Kevin's demand function for good y, which tells us the quantity of good y Kevin will demand at different prices of good x and given his income.