Matching Preferences and Utility
Suppose a consumer buys two goods, orange juice and beer. In a survey of buying habits, the consumer is asked to rank the following four consumption bundles:
Bundle
|
Qty of Juice
|
Qty of Beer
|
1
|
1
|
1
|
2
|
2
|
1
|
3
|
1
|
2
|
4
|
3
|
1
|
The consumer reports that bundle 4 is best, 2 is second best, 3 is third best and 1 is the worst. Which of the following utility functions could be used to represent these preferences (where J and B are the consumption of juice and beer)? Explain in detail how you know.
- U(J,B) = J*B
- U(J,B) = J*J + B
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Peter J Wilcoxen, The Maxwell School, Syracuse University
Revised 11/08/2004