Chapter 3

  1. 1.5 If the neutral product is on the vertical axis, the indifference curves are parallel vertical lines.

  2. 2.2 Sofia’s indifference curves are right angles (as in panel b of Figure 3.5 ). Her utility function is U=min(H,W),[&U|=|~rom~min~normal~(H, W),~norm~&] where min means the minimum of the two arguments, H is the number of units of hot dogs, and W is the number of units of whipped cream.

  3. 2.4 If we apply the transformation function F(x)=xρ[&F(x)|=|x^{|rho|}&] to the original utility function, the new utility function V(q1,q2)=F(U(q1,q2))=[(q1ρ+q2ρ)1/ρ]ρ=q1ρ+q2ρ,[&V(q_{1}, q_{2})|=|F(U(q_{1}, q_{2}))|=|[(q_{1}^{|rho|}|+|q_{2}^{|rho|})^{1/|rho|}]^{|rho|}&][&|=|q_{1}^{|rho|}|+|q_{2}^{|rho|},&] which has the same preference properties ...

Get Microeconomics: Theory and Applications with Calculus, 4e now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.