Question

In: Economics

Consider a representative consumer with the utility function ?(?, ?) = ?? + ? and the...

Consider a representative consumer with the utility function ?(?, ?) = ?? + ? and the budget constraint ??? + ??? ≤ ?. Assume throughout that all prices and quantities are positive and infinitely divisible.

Find the equation of an arbitrary indifference curve for this utility function (evaluated at ̅ utility level ?).

Sketch of graph of this indifference curve (be sure to justify its shape and to derive/demark any points of intersection with the axes).

Solutions

Expert Solution

Plot these points on the graph

The indifference curve will intersect the x-axis at x=4. This is how the indifference curve would look like. The marginal rate of substitution is decreasing which is why the function is convex in nature.


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