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Problem Set 2

The document presents a problem set focused on utility functions and their marginal rates of substitution. It includes multiple utility functions, asking for calculations of marginal rates of substitution at general points and specific coordinates, as well as identifying bundles where the marginal rate equals 1 and determining optimal consumption bundles given specific budget constraints. Each problem is structured similarly across different utility functions, allowing for comparative analysis.

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2 views2 pages

Problem Set 2

The document presents a problem set focused on utility functions and their marginal rates of substitution. It includes multiple utility functions, asking for calculations of marginal rates of substitution at general points and specific coordinates, as well as identifying bundles where the marginal rate equals 1 and determining optimal consumption bundles given specific budget constraints. Each problem is structured similarly across different utility functions, allowing for comparative analysis.

Uploaded by

ericseo0215
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Problem Set 2

1. For utility function u(x, y) = 5x + y

a. Find the marginal rate of substitution at a general point (x, y) with x > 0 and y > 0.

b. Find the marginal rate of substitution at (x, y) = (1, 4).

c. Find all bundles (x, y) at which the marginal rate of substitution is 1.

d. Find the optimal consumption bundle for the budget with prices p = q = 5 and wealth m = 300.

2. For utility function u(x, y) = min{5x, y}

a. Find the marginal rate of substitution at a general point (x, y) with x > 0 and y > 0.

b. Find the marginal rate of substitution at (x, y) = (1, 4).

c. Find all bundles (x, y) at which the marginal rate of substitution is 1.

d. Find the optimal consumption bundle for the budget with prices p = q = 5 and wealth m = 300.

3. For utility function u(x, y) = 𝑥 3 𝑦

a. Find the marginal rate of substitution at a general point (x, y) with x > 0 and y > 0.

b. Find the marginal rate of substitution at (x, y) = (1, 4).

c. Find all bundles (x, y) at which the marginal rate of substitution is 1.

d. Find the optimal consumption bundle for the budget with prices p = q = 5 and wealth m = 300.

4. For utility function u(x, y) = 𝑥 + 2√𝑦

a. Find the marginal rate of substitution at a general point (x, y) with x > 0 and y > 0.

b. Find the marginal rate of substitution at (x, y) = (1, 4).

c. Find all bundles (x, y) at which the marginal rate of substitution is 1.

d. Find the optimal consumption bundle for the budget with prices p = q = 5 and wealth m = 300.
5. For utility function u(x, y) = x(y + 4)

a. Find the marginal rate of substitution at a general point (x, y) with x > 0 and y > 0.

b. Find the marginal rate of substitution at (x, y) = (1, 4).

c. Find all bundles (x, y) at which the marginal rate of substitution is 1.

d. Find the optimal consumption bundle for the budget with prices p = q = 5 and wealth m = 300.

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