Q.7 A consumer's utility function is given by the expression: U = (0.6x"s + 0.4y"s)*. • Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases? Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate? • Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing consumer's equilibrium condition.

Q.7 A consumer's utility function is given by the expression: U = (0.6x"s + 0.4y"s)*. • Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases? Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate? • Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing consumer's equilibrium condition.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Q.7
A consumer's utility function is given by the
expression: U = (0.6Xx5 + 0.4Y5).
• Determine the marginal utility functions for each
commodity. Does marginal utility decrease when
consumption increases?
Assuming that the price of good X is Rs 15 and the
price of Y is Rs 6, write the equation of the budget line
and plot it when income is Rs 450. What is its slope?
What does it indicate?
Calculate the marginal rate of substitution of Y for X
and interpret its economic meaning. Write the equation
showing consumer's equilibrium condition.
Obtain the equilibrium values of X and Y.
Find the expressions for change in MUx due to increase
in Y and change in MUy due to increase in X.

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