A graph of the utility function U = 4Y + X would reveal that goods X and Y are:
A) perfect substitutes.
B) near substitutes.
C) perfect complements.
D) near complements.

Question

Quizplus · Accepted Answer

The utility function U = 4Y + X is linear, indicating that goods X and Y are perfect substitutes. The coefficients (4 for Y and 1 for X) simply indicate the rate at which the consumer is willing to substitute Y for X, but the linear nature of the utility function means the consumer is indifferent between combinations of X and Y that provide the same level of utility, characteristic of perfect substitutes.

A Graph of the Utility Function U = 4Y