Question

1 Find the MRSl, c for each one of these functions. Explain. (a) u(C, l) =...

1 Find the MRSl, c for each one of these functions. Explain.

(a) u(C, l) = C 0.7l 0.3

(b) u(C, l) = 0.7log(C) + 0.3log(l)

(c) u(C, l) = 0.7C + 0.3l

(d) u(C, l) = min{0.7C, 0.3l}.

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Homework Answers

Answer #1

MRSl, c = MUL/MUC

(a) u(C, l) = C 0.7l 0.3
MUL =

MUC =

So, MRS =

(b) u(C, l) = 0.7log(C) + 0.3log(l)
MUL =

MUC =

So, MRS =

(c) u(C, l) = 0.7C + 0.3l

MUL =

MUC =

So, MRS = 0.3/0.7 = 3/7

(d) u(C, l) = min{0.7C, 0.3l}.
This is a complimentary function so MRS is either zero or infinity.

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