Write down the MRS in terms of α, β, x, and y Draw two indifference curves. Do the indifference curves have the same slope along any vertical line (when x is held constant)? Illustrate and explain. Is it possible to establish whether Y is a normal or inferior good? Explain.
Marginal Rate of Technical Substitution
MRTS reaches a manufacturer when a part of the product is lowered to sustain the manufacturing level when the other part is extended. It is the level of the quantity that is lowered when one extra volume is used, and the output is unchanged.
Preferences and Utility Analysis
Before understanding what is preference and utility analysis, it is very important to understand the terms preference and utility separately.
The Federal election is just around the corner. The competition between the two candidates, Sam and Jenny , is fierce. As a consumer (and Australian voter), you only care about public transportation and child care. Let public transportation be good X and child care be good Y . Each trip in the public transportation costs $10 and each day of child care service costs $100. Your after-tax income is $500 per week. Assume that you always consume a positive amount of both X and Y (also known as interior bundles). Your utility function is given by: U(x, y) = αxβ + 2y + 1
Write down the MRS in terms of α, β, x, and y
Draw two indifference
Is it possible to establish whether Y is a normal or inferior good? Explain.
Based on your answer in part (c), is the
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