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1. Julia’s utility function is U=q1^0.4*q2^0.6 A. Calculate marginal utility for q1 B. Calculate marginal utility...

1. Julia’s utility function is U=q1^0.4*q2^0.6

A. Calculate marginal utility for q1

B. Calculate marginal utility for q2

C. Calculate marginal rate of substitution of

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Answer #1

U = q10.4q20.6

(A) Marginal utility for q1 (MU1) = U/q1 = 0.4 x (q2/q1)0.6

(B) Marginal utility for q2 (MU2) = U/q2 = 0.6 x (q1/q2)0.4

(C) Marginal rate of substitution = MU1/MU2 = [0.4 x (q2/q1)0.6] / [0.6 x (q1/q2)0.4] = (0.4/0.6) x (q2/q1) = 2q2 / 3q1

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