Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You, a consumer, live in a world with two goods, x and y. Your utility function over bundles of the goods is u(qx, qy )
You, a consumer, live in a world with two goods, x and y. Your utility function over bundles of the goods is u(qx, qy ) = min{qx 2qy , 2qx qy } I.e., your utility is either qx 2qy or 2qx qy , whichever is smaller. (a) What is your utility from the bundle (8, 2)? (b) In a graph, draw the line that shows all bundles such that qx 2qy = 12. (c) In the same graph, draw the line that shows all bundles such that 2qx qy = 12. (d) What is the one bundle (qx, qy ) such that qx 2qy = 12 and 2qx qy = 12 are both true? Find it using algebra. (e) In a new graph, graph the indifference curve through bundle (8, 2). Hint: it will have something (a lot) to do with your answers to (b), (c), and (d). (f) What is your marginal rate of substitution at the bundle (8, 2)? Hint: if your indif- ference curve was straight at (8, 2), you could find the marginal rate of substitution at (8, 2) by finding the slope of the indifference curve at (8, 2)
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