Functions of two or more independent variables a. An individual's utility function has the Cobb-Douglas form: U=X0.5y2 where U is an index of her utility and X and Y are the weekly quantities of the two goods consumed. Find the marginal utilities of the two goods. Does the consumer ever experience satiation with respect to either good? b. How does the marginal utility of each good vary as consumption of it increases with consumption of the other good held constant? What is the economic significance of the signs of these partial derivatives? c. By differentiation, show that the indifference curve is negatively sloped and convex in the KL plane. Give an economic interpretation to the slope and curvature of the indifference curve. Sketch the graph of the indifference curve.

Functions of two or more independent variables a. An individual's utility function has the Cobb-Douglas form: U=X0.5y2 where U is an index of her utility and X and Y are the weekly quantities of the two goods consumed. Find the marginal utilities of the two goods. Does the consumer ever experience satiation with respect to either good? b. How does the marginal utility of each good vary as consumption of it increases with consumption of the other good held constant? What is the economic significance of the signs of these partial derivatives? c. By differentiation, show that the indifference curve is negatively sloped and convex in the KL plane. Give an economic interpretation to the slope and curvature of the indifference curve. Sketch the graph of the indifference curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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