3. (ICs for Quasi-Linear Preferences) Consider the utility function: u(x, y) = x1/2 + y. a....
3. (ICs for Quasi-Linear Preferences) Consider the utility function: u(x, y) = x1/2 + y.
a. Find the expression for the MRS (= – dy/dx).
b. Draw one IC making sure its shape reflects your expression for MRS above.
c. Given your expression for MRS, draw another IC above the one you just drew, and comment on how the slopes of the ICs compare at a given level of x (e.g., at x = 1).
Homework Answers
a) MRS= MUx/MUy
MUx= 1/2√x
MUy=1
MRS= 1/2√x
MRS=0.5/√x
b)
C)The slope of IC remains the same at a given level of x on different ICs.
When x=1, MRS= 1/2√1= 1/2
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3. (ICs for Quasi-Linear Preferences) Consider the utility
function: u(x, y) = x1/2 + y.
a....
Hi, please solve . Thank you 7. Shawn has quasi linear preferences, linear in x2. His utility function is given by U...
Hi, please solve . Thank you
7. Shawn has quasi linear preferences, linear in x2. His utility function is given by U (x1, x2) = In(xı) + x2 I (a) Compute his MU, and MUZ (b) Compute Shawn's marginal rate of substitution (MRS) for a bundle (x1, x2). (c) Find his demand function for x, and xz in terms of prices and income (P1, P2, y).
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5. Assume an individual has preferences represented by the utility function U(x, y) = x1/2y1/3 Which...
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Hi, please solve . Thank you
7. Shawn has quasi linear preferences, linear in x2. His utility function is given by U (x1, x2) = In(xı) + x2 I (a) Compute his MU, and MUZ (b) Compute Shawn's marginal rate of substitution (MRS) for a bundle (x1, x2). (c) Find his demand function for x, and xz in terms of prices and income (P1, P2, y).
5. Assume an individual has preferences represented by the utility function U(x, y) = x1/2y1/3 Which of the following statements is necessarily TRUE? Assume prices and income are positive. a. The price consumption curve as the price of x changes) slopes downward. b. The income consumption curve slopes downward. c. Cross-price elasticity of demand for good x with respect to the price of y is negative. d. Price elasticity of demand for good y is negative. (See Besanko 5.6 and...
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