Consumer has preferences between two goods

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A consumer has preferences between two goods, hamburgers (measured by H) and milkshakes (measured by M). His preferences over the two goods are represented by the utility function U = √H + √M. For this utility function MUH = 1/(2√H) and MUM = 1/(2√M).

a) Determine if there is a diminishing MRSH,M for this utility function.

b) Draw a graph to illustrate the shape of a typical indifference curve. Label the curve U1. Does the indifference curve intersect either axis? On the same graph, draw a second indifference curve U2, with U2 > U1.

c) The consumer has an income of $24 per week. The price of a hamburger is $2 and the price of a milkshake is $1. How many milkshakes and hamburgers will he buy each week if he maximizes utility? Illustrate your answer on a graph.

Reference no: EM13885717

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