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Nasiha’s preferences for goods X and Y are represented by ?(?, ?) = ?? + ?...

  1. Nasiha’s preferences for goods X and Y are represented by ?(?, ?) = ?? + ? + ?.

    1. Graphically illustrate Nasiha’s indifference map with your curves labeled as IC1, IC2, and

      IC3, where U1 < U2 < U3. (6 points)

    2. What can you say about Nasiha’s preferences for good Y as she consumes more of it, holding

      her consumption of good X constant? Justify in words and using the appropriate derivative(s).

      (6 points)

    3. What can you say about the rate at which Nasiha is willing to give up Y for each additional unit of X as she moves to the right along an indifference curve? Justify in words and using the appropriate derivative(s). (8 points)

    4. In general, does diminishing marginal utility necessarily violate nonsatiation? Explain. (6 points)

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