Suppose a utility function is given by u(x1, x2) = x12 + x2. Graph the indif- ference curve for utility level 100 and 400. What is wrong about the shape of the indifference curves? Does the utility function describe reasonable preferences? Now suppose prices are p1 = 2, p2 = 1 and 1 = 10. Determine the optimal consumption graphically.

Suppose a utility function is given by u(x1, x2) = x12 + x2. Graph the indif- ference curve for utility level 100 and 400. What is wrong about the shape of the indifference curves? Does the utility function describe reasonable preferences? Now suppose prices are p1 = 2, p2 = 1 and 1 = 10. Determine the optimal consumption graphically.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter3: Preferences And Utility

Section: Chapter Questions

Problem 3.2P

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