Question

If Jane has the utility function U(x, y) = min{x, y} and the price of x is the double the price of y, then Jane will buy equal amounts of x and y. Group of answer choices True False.

Answer 1

Utility is given by :

U = min{x,y}

We can see from above utility function that Jane considers x and y as perfect complements(i.e. Leontief function). For such function in order to maximize utility a consumer consumes at that point whee Budget line intersects kink point of an indifference curve.

For this function kink will occur when x = y and thus whatever be the their prices, Jane will always consume x = y i.e. equal amount of x and y.

Hence, This Statement is True