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Angela's preferences over x and y can be represented by a differentiable function U(x, y). Consider the function V (x, y) = f(U(x, y)), where
Angela's preferences over x and y can be represented by a differentiable function U(x, y). Consider the function V (x, y) = f(U(x, y)), where f : R ? R is a strictly increasing function. Then the marginal utility of x computed from U(x, y) must be equivalent to the marginal utility of x computed from V (x, y), that is, MUx = MVx. Similarly, MUy = MVy. As a result, MUx MUy = MVx MVy = ?MRSxy.
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(e) (6 marks) Angela's preferences over x and y can be represented by a differentiable function U(x, y). Consider the function V(x, y) = f(U(x, y)), where f : R - R is a strictly increasing function. Then the marginal utility of x computed from U(x, y) must be equivalent to the marginal utility of x computed from V(x, y), that is, MU = MVr. Similarly, MU, = MV. As a result, MU. MUy MVyStep by Step Solution
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