Millie's utility function is U(x, y)=min{x, y}.She maximizes her utility subject to a budget constraint.The price of x is the same as the price of y.If the price of x rises and the price of y and her income remain constant, then her consumption of y will certainly decrease.

Question

Quizplus · Accepted Answer

Millie's utility function has a perfect complementarity between x and y, which means that she always consumes them in equal amounts to maximize her utility. When the price of x rises, she will reduce her consumption of x and therefore also reduce her consumption of y to maintain the perfect complementarity. So, her consumption of y will certainly decrease.

Millie's Utility Function Is U(x, Y)=min{x, Y}