Question

U = 10 and V = 100 mean the same thing. a. For U = 10,...

U = 10 and V = 100 mean the same thing.
a. For U = 10, solve for x2 as a function of x1
b. For V = 100, solve for x2 as a function of x1
c. Compare your answers to a and b. What have you learned?
d. Find MRS for U = 10 and V = 100. Are they the same? Why?
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Homework Answers

Answer #1

We know U =x1x2 and V = U2 = (x1x2)2.

  1. U = 10

10/x1 = x2.

  1. V = 100

             100 = (x1x2)2.

             10 = x1x2

             10/x1=x2

  1. This implies that indifference curve for both the utility function will be same.
  2. MRS for U.

MRS = MU1/MU2 = x2/x1

MRS for V

MRS = 2x2/2x1 = x2/x1

Yes they are same

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