Question

U(A,B)=min[A,B]
A) Find the marginal utilities of each good if you are consuming A=5,B=3

B)What is the marginal rate of substitution if A=5,B=3

C) How substitutable are A and B in the equation?

Answer 1

U(A,B) = min(A,B) [This represents the utility function for perfect complements]

(a) Because MUa/MUb = change in good B / Change in good A

And here change in good B = 0

Change in good A = (5-3) = 2

So, we get ,Marginal utiltiy from good A = 0.

Marginal utiltiy from good B = (5-3) = 2.

(b) MRS = MUa/MUb = change in good B/ change in good A

= 0/2 = 0

MRS = 0 if A=5, and B =3.

(c) There is no substitution between A and B because MRS between and B = 0.