Graph an indifference curve (IC) for the following utility functions and determine whether they obey the assumption of diminishing MRS.
Homework Answers
From the given utility function, the MRS is given by MUx/MUy = 1/x / 1/y or simly y/x. See that as x increases MRS = y/x falls. Hence the utility function exhibits a diminishing or falling MRS
The indifference curve is drawn for U = 20
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b. Compute the MRS.
c. Do these tastes have diminishing marginal rates of
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d. Construct an indifference curve for each of these functions
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e. Do these utility functions represent different preference
orderings?
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