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Suppose you're facing a problem with quasilinear preferences over goods x₁ and x2 represented by the utility function U (x1, x2) = x1 + 3ln (x2 + 5). The indifference curves will look like this: X2 x1 ( A. Find the marginal rate of substitution. What's interesting about it?< B. Find the slope of the indifference curves whenever x2 = 0 (i.e., find MRS (x1, 0)).< C. Why do we care about what MRS (x1, 0) is?<

Suppose you're facing a problem with quasilinear preferences over goods x₁ and x2 represented by the utility function U (x1, x2) = x1 + 3ln (x2 + 5). The indifference curves will look like this: X2 x1 ( A. Find the marginal rate of substitution. What's interesting about it?< B. Find the slope of the indifference curves whenever x2 = 0 (i.e., find MRS (x1, 0)).< C. Why do we care about what MRS (x1, 0) is?<

Economics For Today
Economics For Today
10th Edition
ISBN:9781337613040
Author:Tucker
Publisher:Tucker
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 2SQ
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Suppose you're facing a problem with quasilinear preferences over goods x₁ and x2 represented by the utility function U (x1, x2) = x1 + 3ln (x2 + 5). The indifference curves will look like this: x2 x1 P2 ( A. Find the marginal rate of substitution. What's interesting about it? B. Find the slope of the indifference curves whenever x2 = 0 (i.e., find MRS (x1, 0)).< C. Why do we care about what MRS (x1, 0) is?< D. Will the optimal bundle be interior (where x₁ > 0 and x2 > 0) or a corner solution (where = 2 and p2 either x1 = 0 or x2 = = 0) when P₁ = 2 and = 1? What about when pi = 6?
Transcribed Image Text:Suppose you're facing a problem with quasilinear preferences over goods x₁ and x2 represented by the utility function U (x1, x2) = x1 + 3ln (x2 + 5). The indifference curves will look like this: x2 x1 P2 ( A. Find the marginal rate of substitution. What's interesting about it? B. Find the slope of the indifference curves whenever x2 = 0 (i.e., find MRS (x1, 0)).< C. Why do we care about what MRS (x1, 0) is?< D. Will the optimal bundle be interior (where x₁ > 0 and x2 > 0) or a corner solution (where = 2 and p2 either x1 = 0 or x2 = = 0) when P₁ = 2 and = 1? What about when pi = 6?
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