1. Joe Bob has a utility function given by u (x₁, x2) = x² + x3 + 2x1x2. (a) Compute Joe Bob's marginal rate of substitution. (b) Joe Bob's cousin, Al, has a utility function given by v (1,2)= x1 + x2. Compute Al's marginal rate of substitution. (c) Do u (x1, x2) and v(x1,x2) represent the same preferences?
1. Joe Bob has a utility function given by u (x₁, x2) = x² + x3 + 2x1x2. (a) Compute Joe Bob's marginal rate of substitution. (b) Joe Bob's cousin, Al, has a utility function given by v (1,2)= x1 + x2. Compute Al's marginal rate of substitution. (c) Do u (x1, x2) and v(x1,x2) represent the same preferences?
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.8P
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Transcribed Image Text:1. Joe Bob has a utility function given by u(x1, x2) = x + x² + 2x1x2.
(a) Compute Joe Bob's marginal rate of substitution.
(b) Joe Bob's cousin, Al, has a utility function given by v (1, 2) = x₁ + x2. Compute
Al's marginal rate of substitution.
(c) Do u (x1, x2) and v(x1,x2) represent the same preferences?
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