Question
In: Economics
A consumer consumes two products X and Y. The price of product X is $2 and...
A consumer consumes two products X and Y. The price of product X is $2 and price of product Y is $4. Suppose xx-axis represents quantity of product X, and y-axis represents quantity of product Y. The optimal consumption bundle is (10, 5). If we plot the consumer's indifference curves on this graph, can you say what the slope of the indifference curve is at point (10,5)?
A) No. There is not sufficient information about preferences to answer that.
B) Yes. The slope is -1
C) Yes. The slope is -.5
D) Yes the slope is -2
Solutions
Expert Solution
It is given that the optimal consumption bundle has 10 units of X and 5 units of Y.. the slope of the indifference curve that passes through this bundle should be equal to the slope of the budget line. Now the slope of the budget line is the price ratio, which is given by.-Px/Py or - 1/2 or -0.5. Therefore the slope of the indifference curve
select option C
Rahul Sunny answered 2 years agoRelated Solutions
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A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
c. What is the maximum utility of the consumer?
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A utility-maximizing consumer who consumes quantity x and y of
two goods has a quadratic utility function given by
Ux,y=x+y-0.05x2-0.05y2
subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
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two goods has a quadratic utility function given by
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subject to
2x+5y=128
Where $128 is the consumer’s budget and the prices of the two
goods are, respectively, 2 and 5. Assuming marginal utilities Ux,
Uy > 0,
a. Find the quantity x and y that maximize the utility function.
b. Using bordered Hessian, check utility for a maximum.
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