If the utility for two goods "x" and "y" is measured as U = x + y,then it can be concluded that
A) "x" and "y" are perfect substitutes.
B) "x" and "y" are perfect complements.
C) "x" and "y" are both bads.
D) the indifference curves on the x,y graph will be upward sloping.

Question

Quizplus · Accepted Answer

The utility function U = x + y implies that "x" and "y" are perfect substitutes, since the marginal utility of one good can completely replace the marginal utility of the other good. As a result, the indifference curves will be linear and downward sloping, reflecting the trade-off between the two goods.

If the Utility for Two Goods "X" and "Y" Is