Let X = R2, let u: X→ R be given by u(x) = x²r3, and let be the preference relation on X given by utility representation u. Show that: (a) The function u is not concave. [Hint: Take a second partial derivative with respect to one of the coordinates.] 1/2 1/2 (b) The preference relation is convex. [Hint: You may use the fact that the function f : X → R given by f(x) = x/²² is concave. If you feel like doing some math, try to show that f is concave, but you don't need to do this.]

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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5. [This question gives you some practice with a type of preference called "Cobb-
Douglas preferences" which shows up in many applied economic models because
they are easy to do calculus with.]
Let X = R2, let u: X → R be given by u(x) = r2r3, and let be the
preference relation on X given by utility representation u. Show that:
(a) The function u is not concave. [Hint: Take a second partial derivative with
respect to one of the coordinates.]
(b) The preference relation is convex. [Hint: You may use the fact that the
function f : X → R given by f(x) = x/²x₂
1/2/2 is concave. If you feel like
doing some math, try to show that f is concave, but you don't need to do
this.]
Transcribed Image Text:5. [This question gives you some practice with a type of preference called "Cobb- Douglas preferences" which shows up in many applied economic models because they are easy to do calculus with.] Let X = R2, let u: X → R be given by u(x) = r2r3, and let be the preference relation on X given by utility representation u. Show that: (a) The function u is not concave. [Hint: Take a second partial derivative with respect to one of the coordinates.] (b) The preference relation is convex. [Hint: You may use the fact that the function f : X → R given by f(x) = x/²x₂ 1/2/2 is concave. If you feel like doing some math, try to show that f is concave, but you don't need to do this.]
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The utility function is considered convex if the second derivative is positive. On the other hand, if the partial derivative of the MRS is negative, the preference is said to be convex. 

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