Question
Utility function having the following form is called quasi-linear utility function U(x,x) = f(x)+ 1/2 x, where f(.) is a concave function, that if
Utility function having the following form is called quasi-linear utility function U(x,x) = f(x)+ 1/2 x, where f(.) is a concave function, that if f'>0 and f" < 0. Let U(x,x) = x + x Consider following maximization problem subject to a budget constraint max x1x 1/2 U(x, x) = x/ + x st. Px1 + Px2 = m 1. Draw an indifference curve for this quasi-linear utility function, what is special about it? 2. Compute the marginal utility with respect to x, and x, respectively?
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Principles of Cost Accounting
Authors: Edward J. Vanderbeck, Maria Mitchell
17th edition
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