ajaz_204_2013_2014_HW_4

# Thus we can choose any value for such that here are 3

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Unformatted text preview: her roll of Kodak. The slope has to be less than 1 since Fuji is perceived to be better than Kodak. Thus, we can choose any value for such that: Here are 3 utility functions which represent this consumer’s preferences (in what sense?): Question 2 For each of the following utility models, derive and graph the indifference curve for an arbitrary utility level “Describe” the consumer’s preferences. (a) . √ Answer: The Indifference curve equation is: √ 4 University of Toronto, Department of Economics, ECO 204, 2013 - 2014 y-axis intercept ( ) x-axis intercept ( ) Slope √ Slope at y-axis intercept ( ) Slope at x-axis intercept ( ) From this information, you should be able to deduce that the indifference curves look like: The consumer perceives goods 1 and 2 as “imperfect substitutes” with diminishing (i.e. as | | ). Along the y-axis (where ) we have along the x-axis (where ) we have ; and at √ any interior bundle . Thus, it is conceivable that the consumer may choose a bundle on a boundary and/or in gthe interior bundle of the consumption set. (b) Answer: The Indifference curve equation is: 5 University of Toronto, Department of Economics, ECO 204, 2013 - 2014 y-axis intercept ( ) x-axis intercept ( ) Slope Slope at y-axis intercept ( ) Slope at x-axis intercept ( ) From this information, you should be able to deduce that the indifference curves look like: | | ). The consumer perceives goods 1 and 2 as “imperfect substitutes” with diminishing (i.e. as Along the y-axis (where ) we have along the x-axis (where ) we have ; and at any interior bundle . Thus, the consumer may choose bundle on the boundary and/or in the interior of the consumption set. (b) Answer: The Indifference curve equation is: 6 University of Toronto, Department of Economics, ECO 204, 2013 - 2014 y-axis intercept ( ) x-axis intercept ( ) Slope Slope at y-axis intercept ( ) Slope at x-axis intercept ( ) From this information, you should be able to deduce that the indifference curves look lik...
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