Posted by **april** on Thursday, October 4, 2012 at 4:31pm.

There are two goods 1 and 2. Denote by (x1; x2) the consumption bundle consisting of x1

units of good 1 and x2 units of good 2. A consumer has preferences that described by the

linear utility function:

u(x1; x2) = x1 + 2x2:

1. Write down the equation for the indierence curve that passes through the consumption

bundle (2; 1). Draw that indierence curve in a diagram with x1 on the horizontal axis

and x2 on the vertical axis. In the same diagram, draw the indierence curve along

which the consumer's utility is 2. Determine the marginal rate of substitution (MRS).