Question

Ann and Ben are two students who spend their money on food (?) and clothing (?)....

Ann and Ben are two students who spend their money on food (?) and clothing (?). Ann’s preferences are represented by the utility function ?(?,?) = 10?? while Ben’s preferences are represented by the utility function ?(?, ?) = （1／5 ）? 2? 2 .

a. Write down the equation for Ann’s indifference curve that passes through the bundle (10,5). If she is consuming 5 units of ?, what is the amount of ? that gives her the same utility as (10,5)? What if she is consuming 25 units of ?? Write down Ben’s indifference curve through (10,5) and answer the same questions.

b. Now write down the equation for Ann’s indifference curve that passes through the bundle (15,8). If she is consuming 12 units of ?, what amount of ? will keep her on the same indifference curve? What if she is consuming 40 units of ?? Write down Ben’s indifference curve through (15,8) and answer the same questions.

c. Given your answers, do you think that Ann and Ben have the same or different preferences? Discuss.

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Answer #1

c) Ann and Ben have same preference because answers to both in options a and b are exactly same. It is because their utility functions are just monotonic transformations of each other.

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