Interested in the ordering of bundles

Assignment Help Business Economics

Reference no: EM131238712

We saw in class that since we are only interested in the ordering of bundles, a positive monotonic transformation (one that does not change the order) of a utility function also represents the same preferences. Mathematically, a positive monotonic transformation preserves the marginal rate of substitution (MRS) of the original utility at any point (X,Y). Prove that the following utility functions represent the same preferences by showing that the MRS of (a), (b) and (c) is exactly the same.

(a) U(X,Y ) = X1/4.Y 3/4

(b) U(X,Y ) = 1/4.ln(X) + 3/4.ln(Y )

Reference no: EM131238712

Questions Cloud

Define and graph your budget set in terms of leisure : You are willing to work up to 80 hours a week. You make $10(B + 1) an hour, where B is the second-to-last digit of your Student ID. Define and graph your budget set in terms of leisure (equal to non–worked hours) -Good 1- and ”money spent on every ot..

Suppose the export demand for wheat falls : Much of the demand for U.S. agricultural output has come from other countries. In 1998, the total demand for wheat was Q=3244-283P. Of this, total domestic demand was Qd=1700-107P, and domestic supply was Qs=1944+207P. Suppose the export demand for w..

Estimate the value of the firm : Rewarding insights, LLC. current annual profits are $20,000. If they anticipated a 2% growth rate in profits and a long-term interest rate of 3%, estimate the value of the firm.

?nd another bundle that gives her same level of satisfaction : Rachel’s preferences for goods x and y are represented by the following utility function: U(X,Y ) = X1/2.Y 1/2. Find the marginal rate of substitution. Comment if it is increasing, constant or decreasing in x. Graph the indi?erence curves correspondi..

Interested in the ordering of bundles : We saw in class that since we are only interested in the ordering of bundles, a positive monotonic transformation (one that does not change the order) of a utility function also represents the same preferences. Mathematically, a positive monotonic tr..

Project the amount in her pension plan at retirement : Jill starts working on her 23rd birthday with an annual saary of $57,000. She sets aside 4.5% of her salary at the end of each year for her pension plan, whch is matched by her employer. She hopes her retirement account can make 5.5% per year interes..

Balance trade would have on the value of the dollar : Transactions between the US and the rest of the world are shown below. What would be the initial impact that the US balance trade would have on the value of the dollar?

Dollar and yen exchange rate : Suppose that the dollar/yen exchange rate on 1/1/2015 was ¥120/$. One month later, the rate was ¥115/$. If the J-curve theory holds, which of the following situations would occur, all else being equal?

The immediate impact on russias balance of trade : Suppose Russia's GDP increases at a faster rate relative to its trading partners over the course of the year. What will be the immediate impact on Russia's balance of trade?

User Account

All Pages