econ111_lecture2 - Econ 111 Microeconomics Spring 2009...

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Econ 111 (Spring '09) 1 Econ 111 Microeconomics Spring 2009 Lecture 2 Individual and Market Demand (Chapter 4) Heiwai Tang
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Econ 111 (Spring '09) 2 Some commonly used utility functions Perfect substitutes: U(x,y) = ax + by MRS = a/b Perfect complements: U(x,y) = min{ax, by} MRS = undefined at the corner Cobb-Douglas (1): U(x,y) = x b y c MRS = (by)/(cx) ( notice decreasing MRS )
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