Question

   For each of the following 5 utility functions assume that α>0 and β>0

U^A (x_1,x_2 )=x_1^α x_2^β

U^B (x_1,x_2 )=αx_1+βx_2

U^C (x_1,x_2 )=αx_1+βlnx_2

U^D (x_1,x_2 )=(α/β)lnx_1+lnx_2

U^E (x_1,x_2 )= -αlnx_1-βlnx_2

   Calculate the MRS for each utility function
   Which utility function represent a preference with linear indifference curves?
   Which of these utility functions represent the same underlying tastes?
   Which of these utility functions does not satisfy the monotonicity assumption?
   Which of these utility functions represent preferences that do not satisfy the convex preferences assumption?

Answer 1