Hints%20for%20Min%20utility%20functions - Each such bundle...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Hints for Min utility functions U = min{ 4 x , 2 y }. Set 4x=2y to see when both coordinates are equal This gives y=2x, so two times as much y will be consumed as x Like the perfect complements but with kink along y=2x If a point is chosen below y=2x, then 4x>2y, so indifference curves will be 2y=c, a horizontal line If a point is chosen above y=2x, then 4x<2y, so indifference curves will be 4x=d, a vertical line In effect the consumer consumes bundles consisting of (x,y) with y=2x
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Each such bundle costs p x + 2p y . How many such bundles can be bought? Divide income by the price of the ‘bundle’ =m/(p x +2p y ) What if we have U= min{ 4x+y,5y} Set 4x+y=5y, or 4x=4y, or x=y decides which coordinate of the utility fn counts for the consumer If x>y, then min { 4x+y,5y}= 5y, so an indifference curve will be 5y=c , or horizontal If x<y, then min { 4x+y,5y}= 4x+y, so an indifference curve will be 4x+y=d, or y=d - 4x, line with neg slope...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online