Utility function having the following form is called quasi-linear utility function U(x,x) = f(x)+ 1/2 x,...
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Utility function having the following form is called quasi-linear utility function U(x₁,x₂) = f(x₂)+ 1/2 x₂, where f(.) is a concave function, that if f'>0 and f" < 0. Let U(x₁,x₂) = x² + x₂ Consider following maximization problem subject to a budget constraint max x1x₂ 1/2 U(x₁, x₂) = x₁/² + x₂ st. P₁x1 + P₂x2 = m 1. Draw an indifference curve for this quasi-linear utility function, what is special about it? 2. Compute the marginal utility with respect to x₁, and x₂, respectively? Utility function having the following form is called quasi-linear utility function U(x₁,x₂) = f(x₂)+ 1/2 x₂, where f(.) is a concave function, that if f'>0 and f" < 0. Let U(x₁,x₂) = x² + x₂ Consider following maximization problem subject to a budget constraint max x1x₂ 1/2 U(x₁, x₂) = x₁/² + x₂ st. P₁x1 + P₂x2 = m 1. Draw an indifference curve for this quasi-linear utility function, what is special about it? 2. Compute the marginal utility with respect to x₁, and x₂, respectively?
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Related Book For
Principles of Cost Accounting
ISBN: 978-1305087408
17th edition
Authors: Edward J. Vanderbeck, Maria Mitchell
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