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.
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.