HW2-solution - HW2-Solution 1. BB 3.5 a) By plugging in...

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HW2-Solution 1. BB 3.5 a) By plugging in ever higher numerical values of x and ever higher numerical values of y , it can be verified that Carlos’ utility goes up whenever x or y increases. b) First consider the marginal utility of x , MU x . Since x does not appear anywhere in the formula for MU x , MU x is independent of x . Hence, the marginal utility of movies is independent of the number of movies seen, and so the marginal utility of movies does not decrease as the number of movies increases. Next consider the marginal utility of y , MU y . Notice that MU y is an increasing function of y . Hence, the marginal utility of operas does not decrease in the number of operas seen. In this case, neither good, movies or operas, exhibits diminishing marginal utility. 2. BB 3.10 a) 0 2 4 6 8 10 12 14 0 5 10 15 Food Clothing b) Yes, since the indifference curves are bowed in toward the origin we know that MRS F,C declines as F increases and C decreases along an indifference curve.
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This note was uploaded on 07/17/2008 for the course ECON 501.02 taught by Professor Yang during the Winter '08 term at Ohio State.

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HW2-solution - HW2-Solution 1. BB 3.5 a) By plugging in...

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