Question

True or False :

Quasilinear preferences are homothetic when the optimal amount of one of the goods is not affordable.

Explain your answer.

Answer 1

Solution:- Given statement is False

Explaination:-Quasilinear preferences are homothetic when the optimal amount of one of the goods is affordable.Quasilinearity is another strong restriction based on a similar idea.If one utility function is a monotonic transformation of another, then the former must assign a lower utility number to every bundle than the latter.In other words adding the same amount to one particular good preserves indifference. This means that higher indifference curves are parallel translations of lower ones. In this case, marginal rates of substitution are constant along lines parallel to axes.