Marginal rates of substitution.
(a) Suppose Melinda's utility function is given by U(X, Y ) = ln X + ln Y .
Draw an indifference map with three indifference curves for this utility function.
ii. Find the marginal rate of substitution and interpret what it means.
(b) Suppose Wendy's utility function is given by U(X, Y ) = 5X + 2Y
i. Draw an indifference map with three indifference curves for this utility function.
ii. Find the marginal rate of substitution and interpret what it means.
(c) Suppose Greg's utility function is given by U(X, Y ) = 10 min(3X, Y ).
i. Draw an indifference map with three indifference curves for this utility function.
ii. Use the graphical definition to find the marginal rate of substitution at point (5,3) and interpret what it means