Neutral good and quasi linear

Question

if my good y is neutral and x is essential. My indifference curves look like vertical, but I want to ask that How does my utility function look like and can I say that this is quasi linear because mrs is depended on only x

Bruno Ruas · Answer

In a dual model, if one of than is a neutral, your utility function is variable only in terms of the good X. A preference relation is quasilinear if there is one commodity, called the numeraire, which shifts the indifference curves outward as consumption, i.e., a quasilinear relation only exists if the function has two terms (a numeraire and a second function).
In conclusion, no, in a dual model, if one of the goods is a neutral, your utility function can be:

u(x) = a*X {a strait line}
u(x) = min(X) {a strait line}
u(x) = x^a {a exponential}

Neutral good and quasi linear

One Answer

Add your own answers!

Ask a Question