Katerina has the following utility function for coffee and bagels:U(C, B) = C^1/2 B^1/2,whereCstands for cups of
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Katerina has the following utility function for coffee and bagels:U(C, B) = C^1/2 B^1/2,whereCstands for cups of coffee andBstands for the number of bagels.
a.What is the name for utility functions of this form?
-Cobb-Douglas Utility Function
b.Draw Katerina's indifference curve forU=1.
c.Katerina's friend Ramses also likes coffee and bagels. However, relative to coffee, he likes bagels more than Katerina; that is, Ramses's MRS for
bagels with coffee is higher than Katerina's at any consumption bundle. Give an example of a utility function that Ramses might have. (There are many right answers, but you only need to write down one.)
d.Draw Ramses's indifference curve forU=1 on the same graph as in part (b).
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