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Suppose a person has a utility function given by U = [xρ + yρ]1/ρ where r...

Suppose a person has a utility function given by U = [xρ + yρ]1/ρ where r is a number between −∞ and 1. This is called a constant elasticity of substitution (CES) utility function. You will encounter CES functions in Chapter 6, where the concept of elasticity of substitution will be explained. The marginal utilities for this utility function are given by

MUx=[xρ+yρ]1ρ−1xρ−1 MUy=[xρ+yρ]1ρ−1yρ−1

Does this utility function exhibit the property of diminishing MRSx,y?

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0-1 Now OMRSxy p-2 Oy

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