Find the marginal utility (MU) and marginal rate of substitution (MRS) of following utility functions. 1. U(x1,x2)=ln(x1)+x2,findMUx1,MUx2,andMRS(x1,x2) 2. U(x1,x2)=(2x21+x32)1/2,findMUx1,MUx2,andMRS(x1,x2)
Find the
1. U(x1,x2)=ln(x1)+x2,findMUx1,MUx2,andMRS(x1,x2)
2. U(x1,x2)=(2x21+x32)1/2,findMUx1,MUx2,andMRS(x1,x2)
Marginal Utility (MU) and Marginal Rate of Substitution (MRS) are two important concepts in economics that are used to describe consumer behavior and preferences.
MU refers to the additional satisfaction or happiness that a consumer derives from consuming an extra unit of a good or service. It measures the change in total utility (satisfaction) that results from consuming an extra unit of a good or service.
The MRS is the rate at which a consumer is willing to trade one good for another. It measures the amount of one good that a consumer is willing to give up in exchange for a unit of another good, holding the total level of utility constant.
In general, the MRS and MU are related, as the MRS reflects the trade-off between two goods in terms of their marginal utilities.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
