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19 Apr 2019
Consider the following three utility functions: U(X,Y) = 2X + 2XY + 2Y U(X,Y) = X^2 + 3Y U(X,Y) = 0.5ln(X) + 0.5ln(Y) a. Is the assumption that more is better satisfied for both goods? Justify. (6 points) b. Does the marginal utility of good X diminish, remain constant, or increase as the consumer buys more X, holding good Y constant? Justify. (6 points) c. Is the MRS of X for Y diminishing, constant, or increasing as the consumer substitutes good Y for more of good X along an indifference curve? Justify. (6 points)
Consider the following three utility functions: U(X,Y) = 2X + 2XY + 2Y U(X,Y) = X^2 + 3Y U(X,Y) = 0.5ln(X) + 0.5ln(Y) a. Is the assumption that more is better satisfied for both goods? Justify. (6 points) b. Does the marginal utility of good X diminish, remain constant, or increase as the consumer buys more X, holding good Y constant? Justify. (6 points) c. Is the MRS of X for Y diminishing, constant, or increasing as the consumer substitutes good Y for more of good X along an indifference curve? Justify. (6 points)
Keith LeannonLv2
21 Apr 2019
