n individual’s utility function is given by U = 900x1 + 500x2 + 6x1x2 − x21 − x2/2. When the weekly amount of leisure is x1 = 140 and earned income is x2 = 800 answer the following: (a) What is the marginal utility of x1 ? (b) What is the marginal utility of x2 ? (c) Use the small increments formula to estimate the change in the utility when x1 decreases by 1 and x2 increases by 4. (d) Does the law of diminishing marginal utility hold? (e) What is the MRCS at a given values?
n individual’s utility function is given by U = 900x1 + 500x2 + 6x1x2 − x21 − x2/2. When the weekly amount of leisure is x1 = 140 and earned income is x2 = 800 answer the following: (a) What is the marginal utility of x1 ? (b) What is the marginal utility of x2 ? (c) Use the small increments formula to estimate the change in the utility when x1 decreases by 1 and x2 increases by 4. (d) Does the law of diminishing marginal utility hold? (e) What is the MRCS at a given values?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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An individual’s utility function is given by
U = 900x1 + 500x2 + 6x1x2 − x21 − x2/2.
When the weekly amount of leisure is x1 = 140 and earned income is x2 = 800 answer the following:
(a) What is the
(b) What is the marginal utility of x2 ?
(c) Use the small increments formula to estimate the change in the utility when x1 decreases by 1 and x2 increases by 4.
(d) Does the law of diminishing marginal utility hold?
(e) What is the MRCS at a given values?
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