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

When two goods are perfect substitutes, the consumer is indifferent between the two goods and is willing to consume them in equal quantities. Therefore, the utility function for perfect substitutes will be a linear function where the two goods are added together. Thus, U = x + y represents the utility function for two perfect substitutes. Option B is not correct as it represents the utility function for perfect complements. Option C is not correct as it does not represent a linear function.

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