Question: imagine two goods that when consumed individually give increasing utility...
Imagine two goods that, when consumed individually, give
increasing utility with increasing amounts
consumed (they are individually monotonic) but that, when consumed together, detract from the utility
that the other one gives. (One could think of milk and orange juice, which are fine individually but
which, when consumed together, yield considerable disutility.)
a. Propose a functional form for the utility function for the two goods just described.
b. Find the MRS between the two goods with your functional form.
c. Which (if any) of the general assumptions that we make regarding preferences and utility
functions does your functional form violate?