Kaplan University Economics 326-First Midterm

Mar 31st, 2015
Studypool Tutor
Kaplan University
Price: $10 USD

Tutor description

Does the utility function U (X; Y ) = X 3 y 5 satisfy rationality of underlying preferences?

Word Count: 589
Showing Page: 1/8
Economics 326:First Midterm (October 8, 2014)1Short Answers (6 points each)1710(a.) Does the utility function U (X; Y ) = X 3y 5 satisfy rationality ofunderlying preferences?Answer: Yes. By the fact that a utility function can be written, it satis?es transitivity, anti-re?exivity and completeness.(b.) What are second order conditions? What happens if they are not satis?ed? You do not have to compute second order conditions to answer this question - just explain what they are and give an intuitive explanation about why they are important.Answer: Second order conditions are the second derivative of the Lagrangian (or alternatively the utility function). The utility function needs to be concave in order to ensure that the utility maximization problem can be solved using calculus. In the absence of satisfying the second order conditions, taking ?rst order conditions may lead to a consumption bundle which locally maximizes utility or even minimizes utility.(c.) Why do indierence curves usually slope downwards? What do we need to assume in order to assure that they slope downwards?Answer: As long as marginal utility is positive for all goods, indierence curves will slope downwards. If marginal utility is positive, then by losing some of one good, you need more of another in order to retain the same utility level. So, more of one good will be on the same utility curve as less of another good. (d.) Let U (X; Y; Z) = X 3 Y 3 Z 5 be a utility function. Write thre

Review from student

Studypool Student
" all I can say is wow very fast work, great work thanks "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1822 tutors are online

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors