Consider a market with two goods: good 1 and good 2.Let x1 denote the good 1 consumption and x2 denote the good 2 consumption.Consider a consumer with the following utility function: U(x1,x2) = 7x1+2(x2)0.6What is the marginal utility of good 2 for bundle (8,8)?

Given, U(x1,x2) = 7x1 + 2(x2)0.6 For finding the marginal utility of good 2, we need to differentiate the utility function wrt x2 i.e. ∂U/∂x2U(x1,x2) = 7x1 + 2(x2)0.6 Marginal utility of good 2 = ∂U/∂x2 ∂U/∂x2 = 0 + 2*0.6*(x2)0.6-1 = 1.2(x2)-0.4 At bundle (8,8), ∂U/∂x2 = 1.2(8)-0.4 So, marginal utility for good 2 at bundle (8,8) is 1.2(8)-0.4.

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What is the marginal utility of good 2 for bundle (8,8)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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