Joe Bob's cousin Leonard consumes goods 1 and 2. Leonard thinks that 2 units of good 1 is always a perfect substitute for 3 units of good 2. Which of the following utility functions is the only one that would not represent Leonard's preferences?

Question

Quizplus · Accepted Answer

Leonard's preferences imply that the marginal rate of substitution between goods 1 and 2 is always 2/3, regardless of the initial quantity of each good. Therefore, the only utility function that represents this is C, which takes the minimum between 3 units of good 1 and 2 units of good 2. This ensures that the consumer is indifferent between consuming an additional unit of good 1 or an additional 1.5 units of good 2 (which equals 2/3 of a unit of good 1). None of the other functions have a constant marginal rate of substitution between the two goods.

Joe Bob's Cousin Leonard Consumes Goods 1 and 2