Question 6 Recall that the MRS at a consumption bundle (x1, x2) is defined as negativethe slope of the indifference curve at (x₁, x₂).1. Suppose a utility function is given by u(x₁, x2) = 2√√x1 + 4x2.(a) Specify the equation of the indifference curve through (9,4), and writethe equation in the form x2 = ....(b) Now take the derivative with respect to x₁, and evaluate it at x₁ = 9. Thisis the slope of the indifference curve, and hence you can determine theMRS.(c) Suppose you know that (9, 4) is a person's optimal consumption, and thatthe price of good 1 is p₁ = 4. You know that at the optimum the MRSmust be equal to the price ratio. Use this insight to determine the priceof good 2 and the person's income.2. Do the same for the utility function u(x₁, x₂) = x1x².

Question 6 Recall that the MRS at a consumption bundle (x₁, x2) is defined as negative the slope of the indifference curve at (x₁, x₂). =.... 1. Suppose a utility function is given by u(x₁, x2) = 2√√√x₁ + 4x₂. (a) Specify the equation of the indifference curve through (9,4), and write the equation in the form x2 9. This (b) Now take the derivative with respect to x₁, and evaluate it at x₁ = is the slope of the indifference curve, and hence you can determine the MRS. (c) Suppose you know that (9, 4) is a person's optimal consumption, and that the price of good 1 is p₁ = 4. You know that at the optimum the MRS must be equal to the price ratio. Use this insight to determine the price of good 2 and the person's income. 2. Do the same for the utility function u(x₁, x2) = x1x².

Question 6 Recall that the MRS at a consumption bundle (x₁, x2) is defined as negative the slope of the indifference curve at (x₁, x₂). =.... 1. Suppose a utility function is given by u(x₁, x2) = 2√√√x₁ + 4x₂. (a) Specify the equation of the indifference curve through (9,4), and write the equation in the form x2 9. This (b) Now take the derivative with respect to x₁, and evaluate it at x₁ = is the slope of the indifference curve, and hence you can determine the MRS. (c) Suppose you know that (9, 4) is a person's optimal consumption, and that the price of good 1 is p₁ = 4. You know that at the optimum the MRS must be equal to the price ratio. Use this insight to determine the price of good 2 and the person's income. 2. Do the same for the utility function u(x₁, x2) = x1x².

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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