Question

For the utility function U(X,Y) = XY^3, find the marginal rate of substitution and discuss how...

For the utility function U(X,Y) = XY^3, find the marginal rate of substitution and discuss how MRS XY changes as the consumer substitutes X for Y along an indifference curve.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

and

If consumer consumes more of X and less of Y along a downward sloping indifference curve, then the absolute value of MRS keeps on decreasing. This is also known as law of diminishing marginal utility. The below schedule shows the same -

X Y MRS = Y/3*X
5 58.48 3.90
6 55.03 3.06
7 52.28 2.49
8 50.00 2.08
9 48.07 1.78
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Consider a consumer whose preferences over the goods are represented by the utility function U(x,y) =...
Consider a consumer whose preferences over the goods are represented by the utility function U(x,y) = xy^2. Recall that for this function the marginal utilities are given by MUx(x, y) = y^2 and MUy(x, y) = 2xy. (a) What are the formulas for the indifference curves corresponding to utility levels of u ̄ = 1, u ̄ = 4, and u ̄ = 9? Draw these three indifference curves in one graph. (b) What is the marginal rate of substitution...
Suppose a consumer has the utility function U (x, y) = xy + x + y....
Suppose a consumer has the utility function U (x, y) = xy + x + y. Recall that for this function the marginal utilities are given by MUx(x,y) = y+1 and MUy(x,y) = x+1. (a) What is the marginal rate of substitution MRSxy? (b)If the prices for the goods are px =$2 and py =$4,and if the income of the consumer is M = $18, then what is the consumer’s optimal affordable bundle? (c) What if instead the prices are...
Find  Marginal Utility for x and determine if it is diminishing  Marginal utility for...
Find  Marginal Utility for x and determine if it is diminishing  Marginal utility for y and determine if its diminishing  Marginal rate of Substitution of x for y (MRS xy) and determine if its diminishing U(x,y)=2x^(2/3)y^(1/3) U(x,y)=x^3+4y^(1/4)
Jen’s utility function is U (X, Y ) = (X + 2)(Y + 1), where X...
Jen’s utility function is U (X, Y ) = (X + 2)(Y + 1), where X is her consumption of good X and Y is her consumption of good Y . a. Write an equation for Jen’s indifference curve that goes through the point (X, Y ) = (2, 8). On the axes below, sketch Jen’s indifference curve for U = 36 b. Suppose that the price of each good is 1 and that Jen has an income of 11....
Consider the utility function U(x, y) = x0.4y0.6, with MUx = 0.4 (y0.6/x0.6) and MUy =...
Consider the utility function U(x, y) = x0.4y0.6, with MUx = 0.4 (y0.6/x0.6) and MUy = 0.6 (x0.4/y0.4). a) Is the assumption that more is better satisfied for both goods? b) Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? Explain. c) What is MRSx, y? d) Is MRSx, y diminishing, constant, or increasing as the consumer substitutes x for y along an indifference curve? e) On a graph with x on...
11. Find the marginal utility of good X and the marginal utility of good Y ifor...
11. Find the marginal utility of good X and the marginal utility of good Y ifor the consumer, whose preferences are described by utility function U(x;y) = 2x + y. 12. Find the marginal utility of good X and the marginal utility of good Y for the consumer, whose preferences are described by utility function U(x;y) = xy2. 13. Explain, what should be taken into account in order to find the consumer’s optimal choice of goods. 14. Outline and explain...
1. Consider the following information: Jessica’s utility function is U(x, y) = xy. Maria’s utility function...
1. Consider the following information: Jessica’s utility function is U(x, y) = xy. Maria’s utility function is U(x, y) = 1,000xy. Nancy’s utility function is U(x,y) = -xy. Chawki’s utility function is U(x,y) = xy - 10,000. Marwan’s utility function is U(x,y)= x(y + 1). Which of these persons have the same preferences as Jessica? 2. Suppose the market demand for a product is given by Qd = 1000 −10P      and the market supply is given by Qs= −50...
Tamer derives utility from goods X and Y, according to the following utility function: U(X,Y)= 3...
Tamer derives utility from goods X and Y, according to the following utility function: U(X,Y)= 3 X radical y . His budget is $90 per period, the price of X is PX=$2, and the price of Y is PY=$6. 1. Graph the indifference curve when U= 36 2. What is the Tamer’s MRS between goods X and Y at the bundle (X=8 and Y=2 )? What does the value of MRS means? (أحسب القيمة واكتب بالكلمات ماذا تعني القيمة) 3....
Bob’s preferences are described by the following utility function: u(x,y)=8x^0.5+y 1. Derive bob’s marginal rate of...
Bob’s preferences are described by the following utility function: u(x,y)=8x^0.5+y 1. Derive bob’s marginal rate of substitution (MRS) 2.Is this preference homothetic? Explain your answer for full credits. Be sure to explain what homothetic preference means. 3. Does this preference have the characteristic of diminishing marginal rate if substitution? 4. Suppose Bob's income is w=400 and px=4. Use Bob's MRS to find the range of py where Bob wants to consume zero amounts of y 5. Suppose Bob’s income is...
Suppose the utility function for a consumer is given by U = 5XY. X is the...
Suppose the utility function for a consumer is given by U = 5XY. X is the amount of Good X and Y is the amount of Good Y. a) Neatly sketch the utility function. [Ensure that you label the graph carefully and state any assumptions that you make in sketching the curve.] b) Does this utility function exhibit diminishing marginal utility? [Ensure that you explain your answer fully.] c) Calculate the marginal rate of substitution. [Ensure that you explain your...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT