6. Curtis\'s preferences for ambrosia and bananas can be represented in the foll

Question

6. Curtis's preferences for ambrosia and bananas can be represented in the following way, U(a, b) -2a +36. So the marginal utility he gets from one more ambrosia is U. 2 and the marginal utility he gets from one more banana is Us -3. He faes with the following price vector, (P.R: I (a) At what rate is Curtis willing to substitute bananas for ambrosia? (b) What are Curtis's demand functions? ("Hint" This is a little tricky.. think about what the optimality condition is telling you. Maybe draw some indiffer ence eaurves to get a visunlization of what they are doing)

Explanation / Answer

a)

To find the rate at which curtis substitutes bananas for ambrosia we need to find the Marginal rate of substitution between them

MRS x for y = MUx/MUy

This means we have to find the ratio of marginal utilities of the two goods which is 3/2

Related Questions

Navigate

• Browse (All)
• Browse 6
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.