If someone has a utility function U = 2min{x, y}, then x and y are perfect complements for that person.

Question

Quizplus · Accepted Answer

A utility function represents an individual's preferences for certain combinations of goods. In this case, the utility function shows that the individual's utility depends only on the minimum of the two goods, F1 and S1. This implies that the individual values both goods equally and they are "perfect substitutes" for each other. In addition, the specific functional form of the utility function, which depends on the minimum of a linear function of x and a linear function of y, indicates that x and y are "perfect complements". Therefore, the answer is A.

If Someone Has a Utility Function U = 2min{x, Y}