PROBLEM (2) A consumer has preferences over bundles of apples (x) and oranges (y) represented by the utility function U(x, y) = Vx – 1/y (a) Does she always prefer more oranges to less? (b) Does she exhibit diminishing marginal utility for apples? (c) Does she exhibit diminishing MRS (of apples for oranges)?
PROBLEM (2) A consumer has preferences over bundles of apples (x) and oranges (y) represented by the utility function U(x, y) = Vx – 1/y (a) Does she always prefer more oranges to less? (b) Does she exhibit diminishing marginal utility for apples? (c) Does she exhibit diminishing MRS (of apples for oranges)?
Chapter1: Making Economics Decisions
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Transcribed Image Text:PROBLEM (2) A consumer has preferences over bundles of apples (x) and oranges (y) represented by the
utility function U(x, y) = Vx – 1/y
(a)
Does she always prefer more oranges to less?
(b)
Does she exhibit diminishing marginal utility for apples?
(c)
Does she exhibit diminishing MRS (of apples for oranges)?
Expert Solution

Step 1
The marginal rate of substitution means some units of one good are sacrificed in order to gain an additional unit of another good such that the slope of an indifference curve is negative.
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