Question: The utility function is U=f(x,y) Bundle 1 and Bundle 2 , are on the same indifference curve U o =f(x 1 , y 1 )=f(x

The utility function isU=f(x,y)

Bundle 1 and Bundle 2 , are on the same indifference curve Uo=f(x1, y1)=f(xz, y2)

Bundle 3 is an equal combination of Bundle 1 and Bundle 2

Bundle 3 = 50% of Bundle 1 + 50% of Bundle 2

Utility of Bundle 3 U3=f(x3, y3)

MUX > 0 and MUY > 0 and U3=Uo

Draw theindifference curve, accurately showing the given information and the locations of bundles 1, 2, and 3. Explain your reasoning.

Does this utility function display diminishing marginal utility? Please explain.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Q:

1. This question uses the budget line equation to calculate a set of plot points for a budget line. Using the prices (p1 and p2) and level of income (M) in Table 1 (Parameter table), calculate a set...

Q:

1. This question uses the budget line equation to calculate a set of plot points for a budget line. Using the prices (p1 and p2) and level of income (M) in Table 1 (Parameter table), calculate a set...

Q:

I. TRUE OR FALSE (6 pts each). No points will be given without a short explanation of your answer. 1. An indifference curve is the set of consumption bundles that a consumer can afford, and between...

Q:

please can you help calculate this problem and provide explanation 1. Mr. A derives utility from martinis (m) in proportion to the number he drinks: U(m) = m (1) Mr. A is particular about his...

Q:

Komal buys bus tickets (Good X) for $2.00 each and gummy bears (Good Y) for $1.00 a bag. Her preferences are described by the utility function U = XY. Komal spends $8 a week on these goods. Provide a...

Q:

Nancy consumes chicken (C) and rice (R) for his meals.The price of a unit of chicken is $6, and the price of a unit of rice is $2. Nancy's utility function is:U = (3C)*(2R) Nancy has $132 to spend on...

Q:

Adam s preferences for opera tickets ( good 1 ) and ballet tickets ( good 2 ) can be rep - resented by the utility function uA ( xA 1 , xA 2 ) = xA 1 x A 2 . Eve s utility function is given by uE (...

Q:

Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [2X, Y]. Sketch the graph of the consumers indifference curve that goes through the...

Q:

Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [2X, Y]. Sketch the graph of the consumers indifference curve that goes through the...

Q:

2 3 2 1 2 0 2 6 8 10 Match each transformation of function fwith a feature of the transformed function function decreases as x increases vertical asymptote of x 2 h z g x 2f x f x 2 X j x f x 2 y...

Q:

What role does consumer utility maximization play in a general equilibrium analysis? What is the role played by firm cost minimization in a general equilibrium analysis?

Q:

Apply Porters Five Forces Model to evaluate the attractiveness of the Indian consumer appliance industry. Remember to evaluate all the relevant criteria for each of the five forces and provide a low,...

Q:

Because it is difficult for many investors to gain access to enough information to make good decisions about individual investments, in most cases it is better for many investors to use a longer -...

Q:

must be detailed. FORUM DESCRIPTION Congratulation, you just received a call from the CEO of Starbucks, welcoming you as a new project manager. For your first project, the CEO would live you to...

Q:

4. What means will you use to achieve these values?

Q:

5. List three of what you would call your core values. For each of these core values, answer the following questions. a. What is the purpose of this value in your life? b. How does this value affect...

Q:

3. What values would you say are your core values?