Asked by
Chelsie Snead
on Dec 01, 2024
Verified
Mac's utility function is U(x, y) =max{2x - y, 2y - x}.
A) Mac's preferences are quasilinear.
B) If Mac has more x than y, any increase in his consumption of y would lower his utility.
C) If Mac has more x than y, a decrease in his consumption of y would raise his utility.
D) Mac always prefers more of each good to less.
E) Goods x and y are perfect substitutes.
Utility Function
A mathematical representation that ranks preferences or satisfaction levels consumers derive from different bundles of goods.
Perfect Substitutes
Products or goods that can replace each other perfectly with no loss of utility to the consumer.
- Understand the economics of utility functions and how they model consumer preferences.
- Identify and analyze the characteristics of different utility functions, including quasilinear, homothetic, and perfect substitutes.
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Learning Objectives
- Understand the economics of utility functions and how they model consumer preferences.
- Identify and analyze the characteristics of different utility functions, including quasilinear, homothetic, and perfect substitutes.