Consider a consumer, he has the utility function: u(x1, x2) = xỉ * X2 Could you find a monotone transformation of u(x1,x2) such that the new 1. а. utility function is of the form: u(x1,x2) = xf * x2, where a+b = 1? Find the marginal rate of substitution of the original utility function. Please decide if the indifference curve is convex based on (b). Are the preferences represented by this utility function homothetic? b. C. d.
Consider a consumer, he has the utility function: u(x1, x2) = xỉ * X2 Could you find a monotone transformation of u(x1,x2) such that the new 1. а. utility function is of the form: u(x1,x2) = xf * x2, where a+b = 1? Find the marginal rate of substitution of the original utility function. Please decide if the indifference curve is convex based on (b). Are the preferences represented by this utility function homothetic? b. C. d.
Chapter3: Preferences And Utility
Section: Chapter Questions
Problem 3.2P
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Transcribed Image Text:Consider a consumer, he has the utility function: u(x1, x2) = xỉ * x2
Could you find a monotone transformation of u(x1,X2) such that the new
1.
а.
utility function is of the form: u'(x1, x2) = x² * x2, where a+b = 1?
%3D
Find the marginal rate of substitution of the original utility function.
Please decide if the indifference curve is convex based on (b).
b.
С.
d.
Are the preferences represented by this utility function homothetic?
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