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Now, consider a consumer that has a CES utility function. Let = = 1 and = 0.5: U=U(x,y)=(x 0.5 +y 0.5 ) 2 Assume that

Now, consider a consumer that has a CES utility function. Let = = 1 and = 0.5:

U=U(x,y)=(x0.5+y0.5)2

Assume that U is measured in utils and x and y are measured in units.

(a) Find the equation for the indifference curve for U= 400 for this utility function.

(b) Find the formula for the MRS for this utility function.

(c) Consider two points on this indifference curve: x= 1 and x=16 Find the MRS at each of these points.

(d) Interpret the MRS at x = 16.Be specific.

(e) Does this indifference curve take the typical shape? Explain how you know.

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