In: Economics
A consumer is always indifferent between 2 Cokes and 1 Pepsi. Write out this consumers utility function.
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).