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1. (25) Consider the following utility function which specifies Eli’s preferences over two goods, Xy- lophones...

1. (25) Consider the following utility function which specifies Eli’s preferences over two goods, Xy- lophones (X) and Yo-Yos (Y ). (Please note that we call this type of utility function quasi-linear.) √ U(X,Y)=10 X+20Y (a) (5) What is the marginal utility of X? Label your answer MUX and draw a box around your answer. What is the marginal utility of Y? Label your answer MUY and draw a box around your answer. What is the marginal rate of substitution of X for Y ? Label your simplified answer MRSX,Y and draw a box around it. (b) (5) What is the slope of the indifference curves when X = 4 and Y = 1? Label your answer slope and draw a box around your answer. (c) (5) What is the slope of the indifference curves when X = 1 and Y = 1? Label your answer slope and draw a box around your answer. (d) (10)Start at the bundle described in (c) where X = 1 and Y = 1. How does the slope of the indifference curves change when we increase X while holding Y fixed at 1? In two sentences or less, describe your answer in terms of Eli’s willingness to give up Y for X. Include an argument as to why this intuitively makes sense.

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