Evalute the shape of the indifference curves

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1. Suppose a teenager has $20 and likes both rap music (R) and country music (C) with a set of preferences so that U = C1/2R1/2. Suppose that the iTunes price of a rap music song is and the price of a country music song is . What is the greatest level of affordable utility?

2. Determine whether the following utility functions have strictly convex indifference curves.

a. U= x11/2 + x21/2
b. U= min(x1/5, x2/2)
c. U= x12 + x23 + x1 x2

3. Evalute the shape of the indifference curves of the following utility functions and find MRS for each function:

a. U= A x11/2 x21/3
b. U= 3x1 + 4x2

4. Assume a household gains utility from clean air and hamburgers. If it locates in Dhaka, it will receive 50 hamburgers(H) and 20 units of air quality (A). If it locates in Chittagong, it will receive 100 hamburgers and 10 units of air quality. The household's utility function is U= 10H + 5A. Give conditions for when the household would choose to live in Chittagong, when it would choose to live in Dhaka, and when it would be indifferent to living in either city.

Reference no: EM1354866

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