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Let U(A,B) = (A)^1/3 (B)^2/3 , where A and B are two distinct consumption goods. Compute...

Let U(A,B) = (A)^1/3 (B)^2/3 , where A and B are two distinct consumption goods. Compute the marginal utility for A, MU_A and the marginal utility for B, MU_B. Provide an interpretation for what these mean.

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Answer #1

Ans. Utility function, U = A^1/3 * B^2/3

Marginal utility of A, MUa = dU/dA = 1/3 * (B/A)^2/3

Marginal utility of B, MUb = dU/dB = 2/3* (A/B)^1/3

Marginal utility of A means the addition to total utility if one more unit of A is consumed will be 1/3*(B/A)^2/3

Ans Marginal utility of B means the addition to total utility if one more unit of B is consumed will be 2/3*(A/B)^1/3

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