Answer Happy

Your preferences are represented by the utility function U = 1 for x1 >0 and x2 >0. X1X2 1. Find your marginal utility function for each good. 2. Based on your results in part 1 and the relevant concepts, a. Are your preferences strictly monotonic? Why or why not? b. If your preferences are not strictly monotonic, what do your results in part 1 imply about your preferences and the two commodities? 3. Does your marginal utility of good 1 diminish, remain constant, or increase as you buy more of good 1? How about your marginal utility of good 2? Use calculus and words to answer these questions. 4. Find your marginal rate of substitution between the two goods. Simplify your answer. 5. Find the derivative that determines what happens to your marginal rate of substitution between the two goods as you consume more of good 1 and less of good 2 while keeping your utility level constant. Simplify your answer. 6. Are your preferences homothetic? Why or why not? 7. Show that your utility function is a CES utility function.