2) Write a utility function for the following individuals: (taken from the Nicho

Question

2) Write a utility function for the following individuals: (taken from the Nicholson Workbook) Miss Muffett likes curds (x) and whey () and is always willing to give up one cup of curds for ten fluid ounces of whey. a) b) Jack Sprat can eat no fat (r) but he can always give it to his wife. She gives him lean V), which he can never get enough of - each additional pound of lean gives him the same additional satisfaction. c) King Cole likes to smoke a pipe, but is very particular about the blend of tobacco he uses. He will only smoke 10 parts of Havana Gold (x) to 1 part Virginia Splendor

Explanation / Answer

Answer 2.

(a) U(x,y) = 10x + y x and y are perfect substitutes and x gives 10 times the utility of y.

(b) U(x,y) = cy, where c is constant and utility keeps on increasing with increasing y.

(c) U (x,y) = min(10x, y) x and y are complementary goods. They are always consumed in fixed proportion i.e. 10:1.

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