Consider a utility function u(x, y) = 2xºyb, where 0 <a < 1 and 0 < b < 1. Also assume that x, y > 0. 7.1. Derive the marginal utility of x and the marginal utility of y and state whether or not the assumption that more is better is satisfied for both goods. 7.2. Does the marginal utility of x diminish, remain constant, or increase as the consumer buys more x? What does it mean in words? 7.3. What is MRSxy? 7.4. Suppose a, b = {. What is MRS at (x, y) = (1, 4) and what does it mean in words? What is MRS at (x, y) = (4, 1) and what does it mean in words? 7.5. Continue assuming a, b = {. Draw two indifference curves of the utility function. To get full credit, draw one with the level of utility 2 and the other with the level of utility 3. For each indifference curve, label at least one point on the curve. 7.6. Draw tangent lines at (x, y) = (1, 4) and (x, y) = (4, 1) in the same graph and label the slopes you solved in MRS(1, 4) and MRS(4,1).

Order your Assignment today and save 15% with the discount code ESSAYHELP

X