Suppose we have the following utility function: U(x,y)=x^0.33 y^0.67 1) What is the Marginal utility of x? Marginal utility of y? 2) Comment on how the marginal utility of each changes as x increases and discuss why that makes sense. 3) Does this utility function follow the more is better rule? How do you know? 4) What is the marginal rate of substitution (MRS)? What do we know about the shape of the indifference curve given this MRS? 5) Now suppose we have a new utility function: U(x,y)=x+y. What type of goods are these? Explain.
Suppose we have the following utility function: U(x,y)=x^0.33 y^0.67 1) What is the Marginal utility of x? Marginal utility of y? 2) Comment on how the marginal utility of each changes as x increases and discuss why that makes sense. 3) Does this utility function follow the more is better rule? How do you know? 4) What is the marginal rate of substitution (MRS)? What do we know about the shape of the indifference curve given this MRS? 5) Now suppose we have a new utility function: U(x,y)=x+y. What type of goods are these? Explain.
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 1E
Related questions
Question
Transcribed Image Text:Suppose we have the following utility
function: U(x,y)=x^O.33 y^0.67
1) What is the Marginal utility of x? Marginal
utility of y?
2) Comment on how the marginal utility of
each changes as x increases and discuss
why that makes sense.
3) Does this utility function follow the more
is better rule? How do you know?
4) What is the marginal rate of substitution
(MRS)? What do we know about the shape
of the indifference curve given this MRS?
5) Now suppose we have a new utility
function: U(x,y)=x+y. What type of goods
are these? Explain.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
