Utility (L3)

Question 1

explain utility being an ordinal concept

Answer 1

only the relative ranking matters, not the value itself

Question 2

perfect substitutes

Answer 2

MRS stays the same straight line

Question 3

perfect compliments

Answer 3

when one increases, the other good must increase in the same proportion
you’re indifferent as long as you have a set (pairs of socks, as long as you have one to match another, its fine)
looks like an axis

Question 4

CES preferences

Answer 4

constant elasticity of substitution
concave curve not convex when alpha is greater than 1

Question 5

quasilinear preferences

Answer 5

same slope,parallel convex but flatter

Question 6

how to calculate MRS

Answer 6

• dU/dX1 / dU/dX2