A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle (8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consuming bundle (4, 4). She is indifferent between these two bundles. Assuming that the utility function is Cobb-Douglas of the form U(x,y)=xα yβ, where α and β are positive constants, what is the utility function for this consumer?
A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle (8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consuming bundle (4, 4). She is indifferent between these two bundles. Assuming that the utility function is Cobb-Douglas of the form U(x,y)=xα yβ, where α and β are positive constants, what is the utility function for this consumer?
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.14P
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Question
A consumer is willing to trade 4 units of x for 1 unit of y when she is consuming bundle
(8, 1). She is also willing to trade in 1 unit of x for 2 units of y when she is consuming
bundle (4, 4). She is indifferent between these two bundles. Assuming that the utility
function is Cobb-Douglas of the form U(x,y)=xα yβ, where α and β are positive
constants, what is the utility function for this consumer?
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