1.Assume that a consumer has a utility function of the following form:u= X, +-X2where x, = quantity of $5 bill and x, = quantity of $1 bills. Note that $5 bills and $1 bills are perfectsubstitutes.Solve for this consumer's indifference curve (IC) at u = 10 and u = 20. Plot at least two%3Dpoints on each curve. Be sure to include the function that solves for each IC. 3ptWhat is the marginal rate of substitution of $1 bills for $5 bills (MRS,→x,) for eachcurve? Does it diminish with increases in x,? 3pt%25 billsX2Explain wvhy or why not.

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Assume that a consumer has a utility function of the following form: where x, = quantity of $5 bill and x, quantity of $1 bills. Note that $5 bills and S1 bills are perfect %3D !! substitutes. Solve for this consumer's indifference curve (IC) at u = 10 and u 20. Plot at least two points on each curve. Be sure to include the function that solves for each IC. 3pt What is the marginal rate of substitution of $1 bills for $5 bills (MRS,-x,) for each curve? Does it diminish with increases in x,? Explain why or why not. 3pt

Assume that a consumer has a utility function of the following form: where x, = quantity of $5 bill and x, quantity of $1 bills. Note that $5 bills and S1 bills are perfect %3D !! substitutes. Solve for this consumer's indifference curve (IC) at u = 10 and u 20. Plot at least two points on each curve. Be sure to include the function that solves for each IC. 3pt What is the marginal rate of substitution of $1 bills for $5 bills (MRS,-x,) for each curve? Does it diminish with increases in x,? Explain why or why not. 3pt

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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