A consumer's utility function is given by the expression: U = (0.6x*s + 0.4Y*s)*. • Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases? • Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate? • Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing consumer's equilibrium condition.

A consumer's utility function is given by the expression: U = (0.6xs + 0.4Ys)*. • Determine the marginal utility functions for each commodity. Does marginal utility decrease when consumption increases? • Assuming that the price of good X is Rs 15 and the price of Y is Rs 6, write the equation of the budget line and plot it when income is Rs 450. What is its slope? What does it indicate? • Calculate the marginal rate of substitution of Y for X and interpret its economic meaning. Write the equation showing consumer's equilibrium condition.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter4: Utility Maximization And Choice

Section: Chapter Questions

Problem 4.5P

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