Jai only consumes 2 goods, and . Both goods have equal prices, which remain constant throughout. However, Jai's income keeps increasing. As his income increases, he continues to consume and in exactly the same ratio as he did before. Then
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Jai only consumes 2 goods, X and Y. Both goods have equal prices, which remain constant throughout. However, Jai's income keeps increasing. As his income increases, he continues to consume X and Y in exactly the same ratio as he did before. Then (A) X and Y must be perfect complements for Jai (B) Jai has utility function of the form U = XY (C) X and Y must be perfect substitutes (D) X and Y may be either perfect complements, perfect substitutes, or Jai's preferences may be represented by utility function U = XY
Consumer preferences and utility has come up 93 times in 7 exams since 2007.
This question is on Homothetic and quasilinear preferences, part of Consumer preferences and utility in Microeconomics.
Preferences whose expansion paths are straight lines (homothetic), or whose demand for one good ignores income (quasilinear).
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Question from the JNU SIS 2018 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.