Suppose that the following utility function is given U(X,Y) = X//3y1/2, which of the following is correct? OWe have convex preferences since Law of diminishing Marginal Rate of Substitution holds and indifference curves are bowed inward towards the origin OWe have convex preferences since Law of diminishing Marginal Utility holds and indifference curves are bowed outward from the origin OWe have convex preferences since Law of diminishing Marginal Rate of Substitution fails to hold and indifference curves are bowed inward towards the

Suppose that the following utility function is given U(X,Y) = X//3y1/2, which of the following is correct? OWe have convex preferences since Law of diminishing Marginal Rate of Substitution holds and indifference curves are bowed inward towards the origin OWe have convex preferences since Law of diminishing Marginal Utility holds and indifference curves are bowed outward from the origin OWe have convex preferences since Law of diminishing Marginal Rate of Substitution fails to hold and indifference curves are bowed inward towards the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A consumer has the following utility function: U(x, y) = y + x1/2. Let px and py bt the corresponding prices and m her income. a). Write down the corresponding Lagrangian function and find the first order conditions (FOCs). b). Use these FOCs to find the expression for the marginal rate of substitution (MRS). Bearing in mind that the MRS is the slope of the indifference curve, what can you tell about the indifference curves of a quasilinear utility function?
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A5
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Make a curve of the budget line curve with the Indifference curve, make a separation between the substitution effect and the income effect Continue to make the demand curve decrease
The marginal rate of substitution is the slope of an indifference curve. O True O False
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