brollysan
Mar30-08, 08:03 PM
1. The problem statement, all variables and given/known data
Given the utility function u(x1,x2)= (x1)^a + (x2)^a where 0<a<1
Find the marginal substitution rate
Find the change in the marginal substitution rate when x2 is partially increased.
2. Relevant equations
Marginal rate of substitution: dx2/dx1= -(du(x1,x2)/dx1)/(du(x1,x2)/dx2
3. The attempt at a solution
By partially derivating i get that the marginal rate of substituion (MRS) is -(ax1^(a-1))/ax2^(a-1)
When x2 is partially increased, does it simply mean i add a constant to x2?
Given the utility function u(x1,x2)= (x1)^a + (x2)^a where 0<a<1
Find the marginal substitution rate
Find the change in the marginal substitution rate when x2 is partially increased.
2. Relevant equations
Marginal rate of substitution: dx2/dx1= -(du(x1,x2)/dx1)/(du(x1,x2)/dx2
3. The attempt at a solution
By partially derivating i get that the marginal rate of substituion (MRS) is -(ax1^(a-1))/ax2^(a-1)
When x2 is partially increased, does it simply mean i add a constant to x2?