the udlity and marginal uinty uncdons on wo rate graphs. Does this utility funct
ID: 1136863 • Letter: T
Question
the udlity and marginal uinty uncdons on wo rate graphs. Does this utility function satisfy the 3.4. Consider the utility function Ux,y)-yV with ciple of diminishing marginal utility? Explain. die marginal utilities Mu 2V r and MU y . PROBLEMS a) Does the consumer believe that more is better for b) Julie and Toni will have the same ordinal ranking each good? b) Do the consumer's preferences exhibit a diminish Bby one of the functions, it is also preferred by the oth ing marginal utility of Is the marginal utility of Do Julie and Toni have the same ordinal ranking of diminishing? different baskets if, when basket A is preferred to bas ferent baskets of r and y? Explain.Explanation / Answer
a) As U is increasing whenever x or y increases,more of each good is better.Note that both MUx and MUy are positive for any positive values of x and y thereby proving that more of each good is better.
b) Keeping y constant,whenever x increases,MUx will fall and when y increases, MUy will not change
So, the preference exhibit not diminishing but constant marginal utility of y.
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