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Problem 1 Consider the utility function U (x, y) = xy + x, with M Ux = y + 1 and M U3, = x.
Problem 1 Consider the utility function U (x, y) = xy + x, with M Ux = y + 1 and M U3, = x. (Verify these.) a. is the assumption of \"more is better\" (non-satiation) satised for both goods x and y? b. does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? Explain. c. what is MRS\"? d. is MRS\" diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? e. on a graph with x on the horizontal axis and y on the vertical axis, draw a typical indifference curve (not necessarily exactly to scale, but should reect whether M RS x4! is diminishing or not). Label the curve as U1. f. on the same graph, draw a second indifference curve U2, where U2 > U1
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