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Old 30th September 2007, 06:53 AM   (permalink)
Default help me with utility function

Mr. A derives utility from martinis in proportion to the number he drinks,
U(M)=M
Mr. A is very particular about his martinis, however: he only enjoys them made in the exact proportion of 2 parts gin to one part vermouth.
Hence we can rewrite Mr.A's utility function as:
U(M)=U(G,V)=Min(G/2,V)
where "Min" means that the utility is given by the minimum value of the two variable parentheses. Graph Mr.A's indifference curve in terms if G and V for various levels of utility.
Show that regardless of the prices of the two ingredients, Mr. A will never alter the way he mixes martinis.
andales is offline   Reply With Quote
Old 2nd October 2007, 01:29 AM   (permalink)
Default

for min,

(2G,V)
or
(G,V/2)
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