6. Suppose a consumer has a utility function of U(x, y) 2 for , y 2 0. Which of

Question

6. Suppose a consumer has a utility function of U(x, y) 2 for , y 2 0. Which of the following statements is the most likely to be true about a consumer's optimal decision? O a Both goods are consumed. Ob No goods are consumed. OG. Only one of the goods is consumed. Od. it occurs where the indifforence curve is tangent with the budget line. QUESTION 7 7. Envision a graph with meat on the horizontal axis and vegetables on the vertical axis. A strict vegetarian would have indifference curves that are: O a vertical lines Ob horizontal lines OG right angles. upward sloping,

Explanation / Answer

6) The asnwer is D -) it occurs where the indifference curve is tangent with the budget line.

because, the consumer optimal bundle is the maximum satisfaction or utility that a consumer get when he choose two goods out of his budget . and at the optimal consumption bundle, consumer indifference curve is tangent to the budget constraint.

7) The answer is B -) Horizontal lines.

because, for a strict vegeterian, the meat gives no utitlity and hence it will not buy any meat either . therefore his indifference curve will be horizontal lines indication zero utility from meat.

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