Independent University, Bangladesh

ECN-301: Intermediate Microeconomics

Spring 2024
Assignment
(Total Marks – 20)

1. Identify the types of utility represented by the following utility functions and draw indifference
curves for these utility functions. Calculate the MRS for these following utility functions,
identify if these functions exhibit diminishing MRS. (12)
0.85 0.15
a. U(X,Y) = X Y
b. U(X,Y) = 6X + 3Y
c. U(X,Y) = ln X + Y
2. Let the utility function of a consumer be given as: Max U  20  10 x  20 y  x 2  y 2 here x
x, y

and y are the quantity of the 2 commodities. Let the price of commodity x be taka 4 and price of
commodity y be taka 2 per unit. Suppose consumer cannot spend more than 30 takas on these
commodities. How many units of each commodity will be bought by this consumer and what will
be the utility derived from this consumption. Use the Lagrange method to solve the problem. (5)

3. Following are the name of set of two goods. For each set of goods identify the type of preference,
write down the utility function and draw indifference curves for that preference. (Draw the first
good in the x-axis) (3)
a. Shampoo and body wash (Consumer likes both the goods and there is diminishing MRS
for increasing the consumption of shampoo)
b. Black Marker and Blue Marker
c. Tea and Sugar