Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started