Paul's utility function is min{x + 3y, 3x + y}. Simon's utility function is min{ 3x + 9y, 9x + 3y}. Paul and Simon have the same income and face the same prices.
A) Paul and Simon will demand the same amount of good x.
B) Paul will demand more of good y than Simon.
C) Simon will demand more of good y than Paul.
D) Each will prefer the other's consumption bundle to his own.
E) None of the above.

Question

Quizplus · Accepted Answer

Paul's utility function and Simon's utility function are both Leontief-type functions, which means they will consume goods in fixed proportions. For Paul, the optimal bundle is where x + 3y = 3x + y, leading to x = y. For Simon, the optimal bundle is where 3x + 9y = 9x + 3y, also leading to x = y. Therefore, both will demand the same amount of good x.

Paul's Utility Function Is Min{x + 3y, 3x + Y}