micro

[divya]

hey this is a question from this year's micro paper...........
Q.suppose sushi and ice cream have the same quality,the more  you consume the more you want....what kind of preferences are these?should such a consumer diversify?


i think this is the answer------
the utility function will be like U(x,y)=max{x,y}....and the consumer shouldnt diversify as the optimum consumption for such preferences should be to specialise in the good whose greater quantity is available...ie....there would be a corner solution....

guys pls help me out and tell me is this answer right??????

THANK YOU!!!

[anon_econ]

Looks like a case of concave preferences (that is, increasing MRS) to me. The function you have taken is one possible utility function for such preferences, but there can be others.
I'm not sure abt this though..

[divya]

hi vasudha....:)))

dear i think that these preferences cant  be concave as its given that more is better of both goods...and its not mentioned that they are not liked to be consumed together....but even i am not too sure abt this....

[anon_econ]

I will have concave preferences if my MRS is increasing. And MRS will be increasing bcoz the greater the quantity of x i have, the more i want it, and the more will be my marginal utility of x. Thus I'd be willing to give up a greater quantity of y for an additional unit of x.