Robert's utility function is U(x, y)= min{4x, 2x + y}.The price of x is $3 and the price of y is $1.Robert's income offer curve is
A)a ray from the origin with a slope of 2.
B)a line parallel to the x axis.
C)a line parallel to the y axis.
D)the same as his Engel curve for x.
E)none of the above.

Question

Quizplus · Accepted Answer

Robert's utility function is homogeneous of degree zero, which implies that his income offer curve will be a straight line through the origin. The slope of the income offer curve is given by the ratio of the prices of x and y, which is 3/1 = 3. However, since his utility function is "quasi-linear" in y (meaning that y only appears linearly and is not affected by changes in x), the income offer curve will be a ray from the origin with slope 3/1 = 3.

Robert's Utility Function Is U(x, Y)= Min{4x, 2x + Y}