Consider the utility function U(X,Y) = 2X+2XY+2Y. (a) Does the marginal utility of X diminish, remain...

 

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Consider the utility function U(X,Y) = 2X+2XY+2Y. (a) Does the marginal utility of X diminish, remain constant, or increase as the conomer buys more X, holding Y constant? Use derivative(s) to justify your response. (b) Is the MRS of X for Y diminishing, constant, or increasing as the consumer substitutes X for Y from left to right along an indifference curve? Use derivative(s) to justify your response. (c) Compare and contrast the principles of diminishing marginal util- ity and diminishing marginal rate of substitution. What do these principles have in common? How do they differ? Consider the utility function U(X,Y) = 2X+2XY+2Y. (a) Does the marginal utility of X diminish, remain constant, or increase as the conomer buys more X, holding Y constant? Use derivative(s) to justify your response. (b) Is the MRS of X for Y diminishing, constant, or increasing as the consumer substitutes X for Y from left to right along an indifference curve? Use derivative(s) to justify your response. (c) Compare and contrast the principles of diminishing marginal util- ity and diminishing marginal rate of substitution. What do these principles have in common? How do they differ?

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a To determine whether the marginal utility of X diminishes remains constant or increases as the consumer buys more X while holding Y constant we need to calculate the derivative of the utility functi... View the full answer