If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?
A) U = x + y
B) U = x ∗ y
C) U = +
D) Any of the above.

Question

If two goods,"x" and "y",are perfect substitutes,then which of the following best represents the utility function for the two goods?
A) U = x + y 
B) U = x ∗ y 
C) U = + 
D) Any of the above.

Quizplus · Accepted Answer

If two goods are perfect substitutes, it means that the consumer is indifferent between the two goods and will consume whichever is cheaper. Hence, the utility function for perfect substitutes is additive, meaning the total utility is the sum of the quantities of the two goods consumed. Therefore, choice A represents the correct utility function for perfect substitutes. Choice B represents the utility function for perfect complements. Choice C appears to be a random combination of numbers and does not represent any meaningful utility function.

If Two Goods,"x" and "Y",are Perfect Substitutes,then Which of the Following