Question
Adam's preferences are represented by the utility function (1,2) = 1 2 2 3 . The prices of 1 and 2 are 1 and 2
Adam's preferences are represented by the utility function (1,2) = 1223. The prices of 1and 2 are 1and 2, respectively.
a. What is the slope of Adam's indifference curve?
b. If Adam's budget line is tangent to his indifference curve at (1,2), then 11 / 22=?
c. Solve for the optimal values of 1,2 that Adam will consume.
d. When he is consuming the best bundle he can afford, what fraction of his income does Douglas spend on 1?
e. Adam's friends, Malthus and Ricardo, have similar utility functions, but the exponents may be different, or their utilities may be multiplied by a positive constant. If a family member has a utility function (,) = 1a2b where a, b, and c are positive numbers. What fraction of their income will Adam's friend spend on 1?
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