Assume that a consumer has a utility function of the following form: where x, = quantity of $5 bill and x, quantity of $1 bills. Note that $5 bills and S1 bills are perfect %3D !! substitutes. Solve for this consumer's indifference curve (IC) at u = 10 and u 20. Plot at least two points on each curve. Be sure to include the function that solves for each IC. 3pt What is the marginal rate of substitution of $1 bills for $5 bills (MRS,-x,) for each curve? Does it diminish with increases in x,? Explain why or why not. 3pt
Assume that a consumer has a utility function of the following form: where x, = quantity of $5 bill and x, quantity of $1 bills. Note that $5 bills and S1 bills are perfect %3D !! substitutes. Solve for this consumer's indifference curve (IC) at u = 10 and u 20. Plot at least two points on each curve. Be sure to include the function that solves for each IC. 3pt What is the marginal rate of substitution of $1 bills for $5 bills (MRS,-x,) for each curve? Does it diminish with increases in x,? Explain why or why not. 3pt
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 3SQP
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