Reference no: EM13236180
Consider the utility function U (x,y) = x + y^(1/2).
(a) Is the assumption that more is better satisfied for both goods?
(b) Does the marginal utility of y diminish, remain constant, or increase as the consumer buys more y? Explain.
(c) What is MRSx,y?
(d) Is MRSx,y diminishing, constant, or increasing as the consumer substitutes x for y along an indi§erence curve?
(e) On a graph with x on the horizontal axis and y on the vertical axis,draw a typical indifference curve (it need not be exactly to scale, but it needs to reflect accurately whether there is a diminishing MRSx,y ). Also indicate on your graph whether the indifference curve will intersect either or both axes. Label the curve U1.
(f) On the same graph draw a second indifference curve U2, with U2 > U1.
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