Microeconomics 2nd Edition by Douglas Bernheim

Exercise 2

Sarah's preferences can be described by the utility function U ( X , Y ) = X 2 + Y 2. What is her MRS XY Do her preferences have the declining MRS property Draw the indifference curve corresponding to a utility level of 1 (that is, combinations of X and Y such that U ( X , Y ) = 1). If P X = 1, P Y = 2, and M = 100, at what consumption bundle is her budget line tangent to an indifference curve What is her best choice Is there a difference and, if so, why