Please just do A. Problem I Consider the following consumers with the given util
ID: 1123935 • Letter: P
Question
Please just do A.
Problem I Consider the following consumers with the given utility functions. Each individual maximizes his utility by choosing how much to consume from r and y subject to his budget constraint: Pr+ y 1 Answer the questions 1-7 for each of the consumers. For George, answer only 6 and 7 3/4y4. The prices . Bob has preferences for 1 and y described by a utility function U(r,y)Bob ry + r. The prices of . Charles has preferences for r and y described by a utility function U(r, y)charles 4r +5y. The . Dave has preferences for r and y described by a utility function U(r, y)Dave Vy. The prices of . Edward has preferences for r and y described by a utility function U(, y)Edwardy2. The . Fred has preferences for r and y described by a utility function U(x,y)Fred r-y. The prices of Aaron has preferences for r and y described by a utility function U(r, )Aaron of two goods are P' S30 and $10, and Aaron's income is 1200$ two goods are Pr =10 and = $10, and Bob's income is1010 prices of two goods are F,: $2 and $1, and Charles's income is $50 two goods are P.-84 and = $1, and Dave's income is $100. prices of two goods are F, = 20 and = $10, and Edward's income is 1200$. two goods are $40 and =10, and Fred's income is $1000 prices of two goods are $30 and= $10, and George's income is 550$ . George has preferences for r and y described by a utility function U(r, y)George min2x,3y). The 1. Is the assumption that more is better satisfied for both goods? 2. Calculate MUz and MUy. Does marginal utility of r diminish remain constant, or increase as the consumer buys more r? Explain 3. Calculate MRS Is MRSy diminishing, constant, or increasing as the consumer substitutes r for y along an indifference curve? 4. On a graph with r on the horizontal axis and y on the vertical axis, draw a typical indifference curve it need not be exactly to scale, but it needs to reflect accurately whether there is a diminishing MRS,. Also indicate on your graph whether the indifference curve will intersect either or both axes. Label the curve U 5. On the same graph draw a second indifference curve U2, with U2 > U 6. The consumer is currently spending all of his income. Graph his budget line. Place the number of units of r on the horizontal axis and the number of y on the vertical axis. Also indicate the quantities of r and y where budget line intersects with the axes on your graph. 7. Find the utility-maximizing choice of r and y by using algebra. Is the optimal consumption bundle an interior or corner solution? Calculate the utility at optimal consumption bundle.Explanation / Answer
1). NO, the assumption more is better is not satisfied for both the goods because when we look at Fred's utility function x-y, the utility decreases as the consumption of y increases, thereby showcasing that Fred would want less of y.