Suppose Mary’s utility function for two goods X and Y is given by: U(X,Y) = 3X1/2 Y1/2
In Addition, Suppose consumption bundle A consists of 10 units of X and 10 units of Y, and consumption bundle B consists of 20 units of X and 5 units of Y.
Does consumption bundle “A” lie on a higher/lower/same indifference curve than consumption bundle “B”? Show computations and graph.
Compute Mary’s Marginal Rate of Substitution for X and Y at consumption bundle A. What does this number tell you? Show using computations and graph.