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You learned in class that despite the fact that Marshallian demands are invariable to monotonous transformations of the utility function, the functional form of this
You learned in class that despite the fact that Marshallian demands are invariable to monotonous transformations of the utility function, the functional form of this the latter plays an important role in the consumer problem. In particular, the shape functional function of the utility function will determine whether the optimal basket is sensitive to a increase in the price of one of the goods. a) Discuss (in words) this statement below with reference to the utility function linear (i.e., of the kind U (q1, q2) = q1 + q2) and that of fixed proportions (i.e., of the genus U (q1, q2) = min {q1, q2}).
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