can you explain how they got the answers here 10.Derek has utility for good 1 and good 2 given by u = x1/³x/³.(d)(e)What is Derek's Marginal Rate of Substitution, dr2?When ₁ = 2 and x2 = 8, how much of good 2 is Derek willing to give up toget 1 extra unit of good 1?(c)When x₁ = 8 and x₂ = 1, how much of good 2 is Derek willing to give up toget 1 extra unit of good 1?Explain why the two rates in parts (b) and (c) are different.How are your answers to the above questions different for Derek's friend Joe,who has utility given by v = x²/³x2/³?Solution: a) dx2X2I1dx2X2⇒ dx₂dx₁X1-4dx₁ ⇒ dx₂-4(1) ⇒ 4 units. c)-(1/4) dx₁ ⇒ dx2−(1/4)(1) ⇒ 0.25 units. d) When he has a lot of x2 and a little of x₁ in part(b), his marginal utility of x2 is relatively low and his marginal utility of £₁is relatively high. Therefore, he is willing to give up a lot of x2 to get anadditional unit of x₁. The opposite is true in part (c). e) They would notchange; Joe's utility is a monotonic transformation of Derek's.dx2dx1=X2I1→dx₂-==

Derek's utility function: The marginal rate of substitution between good 1 and good 2 represents the…

(a) (b) (c) 1/3 1/3 Derek has utility for good 1 and good 2 given by u = x₁x₂. What is Derek's Marginal Rate of Substitution, d2 ? dx₁ When ₁2 and 2 = 8, how much of good 2 is Derek willing to give up to get 1 extra unit of good 1? = 8 and ₂ When 1 get 1 extra unit of good 1? = 1, how much of good 2 is Derek willing to give up to

(a) (b) (c) 1/3 1/3 Derek has utility for good 1 and good 2 given by u = x₁x₂. What is Derek's Marginal Rate of Substitution, d2 ? dx₁ When ₁2 and 2 = 8, how much of good 2 is Derek willing to give up to get 1 extra unit of good 1? = 8 and ₂ When 1 get 1 extra unit of good 1? = 1, how much of good 2 is Derek willing to give up to

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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