Re: ISI 2005.. Utility function?

Posted by Dreyfus on Apr 30, 2014; 10:09am
URL: http://discussion-forum.276.s1.nabble.com/ISI-2005-Utility-function-tp7588094p7588096.html

Consider.....vegetable being single good x....now when Laxmi's income is very low she can only afford rice not veggies... this represents the case of quasilinear preference b/w good x nd rice that is U(x,r)= v(r) +x
Now When she can afford veggies she will only prefer to buy either potato or cabbage depending on its price but she will never buy both so it can't represent perfect substitutability b/w veggies, therefore the preferences she have amongst veggies is concave ie x=max{c,p}
The final utility function for luxmi becomes U(r,c,p)= v(r) + max{c,p}