Question
In: Economics
A consumer is always indifferent between 2 Cokes and 1 Pepsi. Write out this consumers utility...
A consumer is always indifferent between 2 Cokes and 1 Pepsi. Write out this consumers utility function.
Solutions
Expert Solution
He is indifferent between 2 Cokes and 1 Pepsi.
It means 1 pepsi gives him same utility as given by 2 cokes and they are perfect substitute. Therefore, Let C = Coke and P = Pepsi.
Then, utility function is given by:
U(C,P) = C + 2P
( Verification of function:
if he gets 2 cokes and 0 pepsi, then U(2,0) = 2
if he gets 1 pepsi and 0 coke, then U(0,1) = 2
Thus, he will be indifferent between 2 cokes and 1 pepsi with the given utility function).
Rahul Sunny answered 2 years agoRelated Solutions
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Quantity
Total Utility from A
Total Utility from B
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40
37
2
76
72
3
108
105
4
136
136
5
160
165
6
180
192
7
196
217
8
208
237
9
216
252
10
220
262
11
220
267
12
216
267
13
208
262
14
196
252
15
180
237
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