I am trying to answer this past paper question on microeconomics and a rather complicated utility function question. The question is below as well as my answer.
In my answer, I use the fact that the marginal rate of technical substitution (MRS) is equal to their price ratio. I think that I derive both demand functions for pizza and apple. I am not sure if they are right and I don't know how to answer:
How James responds to an increase in the price of Pizza?
Just looking at the price of pizza (p1) in the demand functions would mean that an increase in p1 would result in a decrease in demand for apples.
I feel like I have done something wrong and that I would have to consider substitution and/or income effects? I'm terribly confused.