Consider the following utility function, utility = xy. The equation for the indifference curve...

Question:

Consider the following utility function, utility = xy. The equation for the indifference curve at utility level equal to 20 is: (Choose one and show your work.)

a. {eq}100 = xy {/eq}

b. {eq}y = \frac {100}{x} {/eq}

c. {eq}y = \frac {20}{x} {/eq}

d. {eq}400 = xy {/eq}

Answer and Explanation:

The answer is c.

For a bundle to be on an indifference curve with utility equal to 20, the bundle must generates a utility that is also 20, this requires:

  • {eq}x y = 20{/eq}

which then implies:

  • {eq}y = \frac{20}{x} {/eq}

Learn more about this topic:

Indifference Curves: Use & Impact in Economics

from Economics 101: Principles of Microeconomics

Chapter 3 / Lesson 12
9.3K

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