A decision maker has preferences represented by the utility function u(x,y) = xy over two goods and she is indifferent between the bundles (1,a), (b,4), (c,2) and (8,1). (a) Find the values a, b and c. (b) Brittney claims that another utility function, v(x,y) = (xy)^2 + 2xy - 5 , also represents the same preferences hence has the same exact indifference curves as u. Verify that the four bundles above are on the same indifference curve according to v, too, indeed.
A decision maker has preferences represented by the utility function u(x,y) = xy over two goods and she is indifferent between the bundles (1,a), (b,4), (c,2) and (8,1). (a) Find the values a, b and c. (b) Brittney claims that another utility function, v(x,y) = (xy)^2 + 2xy - 5 , also represents the same preferences hence has the same exact indifference curves as u. Verify that the four bundles above are on the same indifference curve according to v, too, indeed.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.3P
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A decision maker has preferences represented by the utility function u(x,y) = xy over two goods and she is indifferent between the bundles (1,a), (b,4), (c,2) and (8,1).
(a) Find the values a, b and c.
(b) Brittney claims that another utility function, v(x,y) = (xy)^2 + 2xy - 5 , also represents the same preferences hence has the same exact indifference curves as u. Verify that the four bundles above are on the same indifference curve according to v, too, indeed.
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