1 Marginal utility and marginal rate of substitution Suppose an individual who derives utility u(x, y) from consuming a units of good X and y units of good Y. For each of the following utility functions, derive the marginal utility of good X, the marginal utility of good Y, and the marginal rate of substitution between X and Y. (A) u(x, y) = x+by¹/3 (B) u(x, y) = (xy) * (C) u(x, y) = ax + xy +by²

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1 Marginal utility and marginal rate of substitution
Suppose an individual who derives utility u(x, y) from consuming a units of good X and
y units of good Y. For each of the following utility functions, derive the marginal utility
of good X, the marginal utility of good Y, and the marginal rate of substitution between
X and Y.
(A) u(x, y) = x+by¹/3
(B) u(x, y) = (xy)
(C) u(x, y) =
ax + xy + by²
(D) u(x, y) =
n(ax + y)
1
(E) u(x, y) = (x² + √y²) = 2
Transcribed Image Text:1 Marginal utility and marginal rate of substitution Suppose an individual who derives utility u(x, y) from consuming a units of good X and y units of good Y. For each of the following utility functions, derive the marginal utility of good X, the marginal utility of good Y, and the marginal rate of substitution between X and Y. (A) u(x, y) = x+by¹/3 (B) u(x, y) = (xy) (C) u(x, y) = ax + xy + by² (D) u(x, y) = n(ax + y) 1 (E) u(x, y) = (x² + √y²) = 2
Expert Solution
Introduction

Here we are given total utility of consumer which depends on 2 goods x & y. And hence we will find the marginal utility from these 2 goods. 

Marginal utility from good x refers to the change in total utility due to the consumption of one additional unit of good x

Marginal utility from good y refers to the change in total utility due to the consumption of one additional unit of good y

The negative of the marginal rate of substitution is the slope of the indifference curve (it shows different combinations of good x & y gives the same level of utility). And it states that if consumer increase the consumption of good x then how many unit of good y consumption should change so that the utility level of the consumer remains the same. 

 

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