Economics 2260A/B Study Guide - Midterm Guide: Engel Curve, Indifference Curve, Inferior Good
6 Dec 2014
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Answer : at (x, y) = (4, 1) , m ux = 0, m uy = 1. At (x, y) = (4, 5) , m ux = 0. 25, M uy = 0. (c) find the marginal rate of substitution at the points (x, y) = (4, 1) and (x, y) = (4, 5). Answer : at (x, y) = (4, 1), m rs = 0. Answer : yes; for any two points lying on the same indi erence curve, the segment that joins them lies on or above that indi erence curve. Consumer b spends all her income of on two goods, food (x) and water (y). A pound of food costs , and a pound of water costs . Consumer b"s preferences are described by the utility function u(x, y) = (x + 2)y. (a) write down the equation for consumer b"s budget line. Answer : x + 2y = 20 (b) find her optimal consumption bundle.
