Asked by David Garcia on Jun 10, 2024
Verified
Murphy's utility function is U(x, y) min4x y, 2x 2y, x 4y.Murphy is consuming 12 units of x and 6 units of y.
a.Draw the indifference curve through this point.At what points does this indifference curve have kinks?
b.The price of good x is $1.What is the highest possible price for y? What is the lowest possible price for y?
Indifference Curve
A graph showing different bundles of goods between which a consumer is indifferent, meaning each combination offers the same level of utility or satisfaction.
Highest Possible Price
The maximum price that a product or service can achieve in a market under current conditions.
Lowest Possible Price
the minimum price at which a good or service is offered, considering all factors including cost, demand, and competition.
- Gain knowledge on the concept of indifference curves and their depiction of various utility levels.
- Examine the limitations of budgets and the impact of various pricing strategies on customer decisions.
Verified Answer
LM
La Mont Hurt Jr.Jun 16, 2024
Final Answer :
a.The indifference curve is a broken line extending from (36, 0)to (12, 6)to (6, 12)to (0, 36).b.The price of y must be between $1 and $4.
Learning Objectives
- Gain knowledge on the concept of indifference curves and their depiction of various utility levels.
- Examine the limitations of budgets and the impact of various pricing strategies on customer decisions.