CB-Session III

# CB-Session III - Microeconomics for Managers PGP-I Which of...

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Microeconomics for Managers PGP-I

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Which of these utility functions are consistent with convex indifference curve and which are not? 1. u(x, y)=2x+y 2. u(x,y)=(xy) 1/2 {Cobb-Douglas } 3. u(x, y)=Min(x, y)
Sachin and Saurabh each plan to spend Rs. 20,000 on the styling and gas mileage features of a new car. They can each choose all styling, all gas mileage, or some combination of the two. Sachin does not care at all about styling and wants the best gas mileage possible. Saurabh likes both equally and wants to spend an equal amount on each. Using indifference curves and budget lines, illustrate the choice that each person will make.

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) multiplier n (Lagrangea fraction this call Lets ). 0 , 0 ( at equal are (3) of sides right and left then (1), equation solves ) 0 , 0 ( suppose Now, ) 3 ........ ( ) , ( ) , ( ) , ( ) , ( , ) 2 ......... ( ) , ( ) , ( ) , ( ) , ( , ) , ( / ) , ( ) , ( / ) , ( : is rule The ) 1 ....... ( ) , ( subject to ) , ( max y x y x y x y b y x y u
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## This note was uploaded on 03/01/2012 for the course STRATEGY Om121 taught by Professor Abhinavdhar during the Spring '12 term at Harvard.

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CB-Session III - Microeconomics for Managers PGP-I Which of...

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