Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:What is the optimum solution for this utility
functions?
• U= min (1/2x, 1/2y)
• U= 1/2 x +1/2 y
• -U= In x + y
Explain why non-convex IC has a corner
solution instead of an interior solution?
Expert Solution
Step 1
The utility function would result in the combination of the goods as a bundle which would result in the demand for the consumer for various commodities. The utility function would result in the different combination of the goods which would result in the demand for the consumers for the goods.
The indifference curve would have convexity as a property of the indifference curve as a result the indifference curve would have interior solution. The non convex solution would have corner solution on the axis.
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