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Consider the consumption bundle x = (x1, x2 ) E RA . A consumer's utility over these alternative bundles is given by U (x1, 2
Consider the consumption bundle x = (x1, x2 ) E RA . A consumer's utility over these alternative bundles is given by U (x1, 2 ) = x1 + x2. i) (3 marks) Using a pen and paper, sketch several indifference curves of this preference relation. ii) (2 marks) Is this preference relation monotone? Explain. iii) (2 marks) Is this preference relation convex? Explain. iv) (3 marks) Determine an algebraic expression for the marginal rate of substitution (MRS). How does the absolute value of the MRS change as the quantity of X1 is increased along a particular indifference curve. Provide some intuition about what types of goods might be represented by C 1 and 2
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