Question

Question 1: You offer Donny the choice between two bundles of Coffee (C) and Muffins (M). The options are (C,M) = (6,4)and(C,M) = (8,2), and Donny indicates he prefers the second option.

(a) Write a utility function for Donny that is consistent with his choice.

Suppose you offer him a third option of (C,M) = (7,6) in addition to the original two, and that Donny indicates he prefers this third option to the first two.
(b) Write a utility function for Donny that is consistent with his choice. It is possible it may be the same as your answer from part (a).

*Please do not put the same answer as a previous post

Would the utility function be a Cobb-Douglas function?

Answer 1

A) a possible Utility function

U(C,M) = Max { C,M }

so U(6,4) = 6, & U(8,2) = 8

This (8,2) is preferred over (6,4)

B) let U = 2C + M

then, U(6,4) = 16

U(8,2) = 18

U(7,6) = 20

Thus (7,6) combination gives highest utility, & is preferred Hence

C) yes, Utility function could be Cobb Douglas

If , U(C,M) = C^.8M^.2

then choice combinations would be same