Jane's utility function is U(x,y)= 2xy. She has 2 units of good x and 4 units of good y. Tim's utility function is U(x,y)= 5x + 2y. He has 4 units of good x and 1 unit of good y. We can conclude that:
A)each prefers their own bundle to the other's bundle.
B)Jane prefers Tim's bundle to her own, but Tim prefers his own bundle to Jane's.
C)each prefers the other's bundle to their own.
D)Tim prefers Jane's bundle to his own, but Jane prefers her own bundle to Tim's.

Question

Quizplus · Accepted Answer

- Jane's utility with her own bundle: U(2,4) = 2(2)(4) = 16
- Tim's utility with his own bundle: U(4,1) = 5(4) + 2(1) = 22
- Jane's utility with Tim's bundle: U(4,1) = 2(4)(1) = 8
- Tim's utility with Jane's bundle: U(2,4) = 5(2) + 2(4) = 18

Therefore, both individuals prefer their own bundle to the other's bundle.

Jane's Utility Function Is U(x,y)= 2xy