3.7 a. A consumer is willing to trade 3 units of x for 1 unit of y when she has 6 units of x and 5 units of y. She is also willing to trade in 6 units of x for 2 units of y when she has 12 units of x and 3 units of y. She is indifferent between bundle (6, 5) and bundle (12, 3). What is the utility function for goods x and y? Hint: What is the shape of the indifference curve? b. A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle (8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consuming bundle (4, 4). She is indifferent between these two bundles. Assuming that the utility function is Cobb-Douglas of the form U(x, y) = xy, where a and B are positive constants, what is the utility function for this consumer? c. Was there a redundancy of information in part (b)? If yes, how much is the minimum amount of information required in that question to derive the utility function?

3.7 a. A consumer is willing to trade 3 units of x for 1 unit of y when she has 6 units of x and 5 units of y. She is also willing to trade in 6 units of x for 2 units of y when she has 12 units of x and 3 units of y. She is indifferent between bundle (6, 5) and bundle (12, 3). What is the utility function for goods x and y? Hint: What is the shape of the indifference curve? b. A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle (8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consuming bundle (4, 4). She is indifferent between these two bundles. Assuming that the utility function is Cobb-Douglas of the form U(x, y) = xy, where a and B are positive constants, what is the utility function for this consumer? c. Was there a redundancy of information in part (b)? If yes, how much is the minimum amount of information required in that question to derive the utility function?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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