Asked by Gursave Singh on Jul 29, 2024
Verified
Charlie's utility function is U(A, B) AB, where A and B are the numbers of apples and bananas, respectively, that he consumes.When Charlie is consuming 15 apples and 90 bananas, if we put apples on the horizontal axis and bananas on the vertical axis, the slope of his indifference curve at his current consumption is
A) 215.
B) -6.
C) -12.
D) -1/6.
E) -1/12.
Indifference Curve
A graph showing different bundles of goods, each measured as to quantity, between which a consumer is indifferent.
Slope
In mathematics, the measure of the steepness or incline of a line, typically defined as the ratio of the vertical change to the horizontal change.
- Assess consumer decisions and compromises via marginal rate of substitution (MRS) and indifference curves.
Verified Answer
TW
Temesha WalkerAug 02, 2024
Final Answer :
B
Explanation :
The slope of an indifference curve is given by the marginal rate of substitution (MRS), which is the negative of the ratio of the marginal utilities of the two goods. For Charlie's utility function U(A, B) = AB, the marginal utility of A (MU_A) is B, and the marginal utility of B (MU_B) is A. Thus, MRS = -MU_A/MU_B = -B/A. At A = 15 apples and B = 90 bananas, MRS = -90/15 = -6.
Learning Objectives
- Assess consumer decisions and compromises via marginal rate of substitution (MRS) and indifference curves.