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Unformatted text preview: 1) MRS > P x /P y , then X = I/P x and Y = 0 2) MRS = P x /P y , then X is anything between 0 and I/ P x and remaining income will be spent on Y 3) MRS < P x /P y , then X = 0 and Y = I/P y Use Graph 4. Quasilinear Utility Function example: U = V(X) + Y Interior + Corner Suppose interior. Use MRS = ERS and Budget constraint Find Price range where Y>0 Then, you can find the price range where Y 0. In this range, Y = 0 and X = I/ P x...
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 Fall '07
 WISSINK
 Microeconomics, Utility

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