Which of the following are true about perfect complements?  Choose all that apply.


Question 3Answer

a.

Perfect complements only provide utility when you have one of each good.


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b.

Perfect complements have a utility function U=A min(Bx,Cy).


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c.

Perfect complements have right angle indifference curves.


d.

Perfect complements have a constant MRS.


e.

Perfect complements always follow the “more is better” assumption.

In the context of perfect complements, which are goods that are always consumed together in fixed proportions, the following statements are true:

b. Perfect complements have a utility function \( U = A \min(Bx, Cy) \).

c. Perfect complements have right angle indifference curves.

The utility function for perfect complements reflects the fixed proportion in which the goods are consumed. The right angle indifference curves represent that the consumer derives utility from consuming the goods together in fixed proportions and does not gain additional utility from consuming more of one good without the other.

Let's review the other options:

a. Perfect complements only provide utility when you have one of each good. (Not necessarily true, as it depends on the specific fixed ratio in the utility function, not necessarily one of each good.)

d. Perfect complements have a constant MRS. (False; perfect complements do not have a constant MRS. The MRS for perfect complements is undefined at the corners of the right-angle indifference curves and zero or infinite along the straight portions.)

e. Perfect complements always follow the “more is better” assumption. (Not true in the traditional sense because additional amounts of one good without the corresponding amount of the other do not increase utility.)

Would you like more details or have any questions about this?

Here are 5 questions you might find helpful:

1. What defines perfect complements in consumer theory?
2. How do the indifference curves of perfect complements differ from those of perfect substitutes?
3. Can you provide an example of perfect complements in real life?
4. How does the marginal rate of substitution (MRS) behave for perfect complements?
5. What happens to utility when the proportion of goods consumed deviates from the fixed ratio for perfect complements?

**Tip:** Understanding the graphical representation of indifference curves for different types of goods (perfect substitutes, perfect complements, and normal goods) can help in visualizing and analyzing consumer preferences and utility.

Explore the characteristics of perfect complements in consumer theory, including their utility function and indifference curves. Learn why perfect complements have right angle indifference curves and delve into the intricacies of their utility function. Ideal for advanced economics students.

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