Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Suppose you are given the utility functionU1(qx,qy)=qx^(1/2)qy^(1/2) . a) Show how the marginal rate of substitution is the same forU2(qx, qy)=(qx)^3(qy)^3 . b) What does
Suppose you are given the utility functionU1(qx,qy)=qx^(1/2)qy^(1/2)
.
a) Show how the marginal rate of substitution is the same forU2(qx, qy)=(qx)^3(qy)^3
.
b) What does this suggest about how economics utilizes preferences?
c) How does the marginal rate of substitution compare if the utility function isU3(qx,qy)=ln(qx)+ln(qy)
?Why would this be the case?Explain.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered 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