Jack and Phil both like apples and oranges. Jack's preferences over these two goods
are represented by the utility function U(xa, xo) = log(xa) + log(xo), where xa is
the number of apples consumed and xo is the number of oranges consumed. Phil's
preferences are represented by the utility function U(x , x ) = x10x10. Their friend
Ken sees this and claims that Jack and Phil have the same preferences. True or False? Explain.
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- could you please explain in detail?
- May 17, 2018 at 12:14am
- I don't think there any thing more I can add -- Log function is an increasing function. So it preserves the ranking of bundles. If Jack prefers a bundle (1,1) to (0,0) then Phil will also prefer (1,1) to (0,0). This will be true for any pair of bundles of apples and oranges.
- May 17, 2018 at 1:11am
- A utility function just attaches a number to a bundle. The higher the number the better you are. Here for any bundle, Jack and Phil will value them in a similar way.
- May 17, 2018 at 1:12am