Econ10a_PSET2

Econ10a_PSET2 - Econ 10A - Problem Set 2 Basic Utility...

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Econ 10A - Problem Set 2 Basic Utility Functions and MRS 1. Maggie Q’s preferences are monotonic in good 1 and good 2 and exhibit Diminishing Marginal Rate of Substitution. Suppose MRS(1,1)> MRS(2,2) > MRS(3,3). . Plot the bundles (1,1), (2,2), (3,3), and the indifference curve or curves on which they reside. 2. Selena’s utility is given by U(x 1 , x 2 ) = 6x 1 2 x 2 3 . Does her utility function exhibit Diminishing Marginal Utility with respect to good 1? Does it exhibit Diminishing Marginal Utility with respect to good 2? Do her preferences exhibit Diminishing Marginal Rate of Substitution? 3. Rachel’s preferences are defined over cans of Mountain Dew and six-packs of mountain Dew (X c and X s , respectively). Write down a plausible utility function for her preferences. What is her Marginal Rate of Substitution at the bundle (1, 1000)? What is her Marginal Rate of Substitution at the bundle (1000, 1)? 4.
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This note was uploaded on 03/03/2011 for the course ECON 10a taught by Professor Babcock during the Winter '11 term at UCSB.

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Econ10a_PSET2 - Econ 10A - Problem Set 2 Basic Utility...

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