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Consider a utility function u(x, y) = x*y, where 0 < a < 1 and 0 < b< 1. Also assume that x, y > 0. %3D 1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? What does it mean in words? 3. What is MRSy? 4. Suppose a, b = .What is MRS at (x, y) = (3, 12) and what does it mean in words? What is MRS at (x, y) = (12, 3) and what does it mean in words? 5. Suppose a, b = . Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each %3D %3! %3D indifference curve, label at least one point on the curve. 6. Draw tangent lines at (x, y) = (4, 16) and (x, y) = (16, 4) in the same graph and label the slopes you solved in MRS(4, 16) and MRS(16, 4). %3D %3D

Consider a utility function u(x, y) = x*y, where 0 < a < 1 and 0 < b< 1. Also assume that x, y > 0. %3D 1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? What does it mean in words? 3. What is MRSy? 4. Suppose a, b = .What is MRS at (x, y) = (3, 12) and what does it mean in words? What is MRS at (x, y) = (12, 3) and what does it mean in words? 5. Suppose a, b = . Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each %3D %3! %3D indifference curve, label at least one point on the curve. 6. Draw tangent lines at (x, y) = (4, 16) and (x, y) = (16, 4) in the same graph and label the slopes you solved in MRS(4, 16) and MRS(16, 4). %3D %3D

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Economics Consider a utility function u(x, y) = x", where 0 < a < 1 and 0 <b < 1. Also assume that %3D x, y > 0. 1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? What does it mean in words? 3. What is MRSy? 4. Suppose a, b = . What is MRS at (x, y) = (3, 12) and what does it mean in words? What is MRS at (x, y) = (12, 3) and what does it mean in words? 5. Suppose a, b = Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each indifference curve, label at least one point on the curve. 6. Draw tangent lines at (x, y) = (4, 16) and (x, y) = (16, 4) in the same graph and label the slopes you solved in MRS(4, 16) and MRS(16, 4).
Transcribed Image Text:Economics Consider a utility function u(x, y) = x", where 0 < a < 1 and 0 <b < 1. Also assume that %3D x, y > 0. 1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? What does it mean in words? 3. What is MRSy? 4. Suppose a, b = . What is MRS at (x, y) = (3, 12) and what does it mean in words? What is MRS at (x, y) = (12, 3) and what does it mean in words? 5. Suppose a, b = Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each indifference curve, label at least one point on the curve. 6. Draw tangent lines at (x, y) = (4, 16) and (x, y) = (16, 4) in the same graph and label the slopes you solved in MRS(4, 16) and MRS(16, 4).
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