Question

Consider a utility function u(x,y) = Xayb, where 0くaく1 and 0 < b 〈 1. Also assume that x,y>0 7.1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 7.2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x?What does it mean in words? 7.3. What is MRS.y? 7.4. Suppose a, b- Wht is MRS at (x, y) -(1,4) and what does it mean in words? What is MRS at (x, y) - (4,1) and what does it mean in words? 7.5. Continue assuming a, b - . Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each indifference curve, label at least one point on the curve. 7.6. Draw tangent lines at (x, y)- (1,4) and (x, y)- (4,1) in the same graph and label the slopes you solved in MRS(1,4) and MRS(4, 1).

Answer 1