Question

Assume an individual’s preference for Fanta (Good x) and Fritters (Good y) are given by

the following utility function: U(x,y)=20= x^0.5y^0.5

REQUIRED:

i) Derive the equation for the indifference curve for this utility function

Answer 1

$x^{0.5}y^{0.5}=20$

$\sqrt{x}\sqrt{y}=20\\\sqrt{y}=\frac{20}{\sqrt{x}}\\y=(\frac{20}{\sqrt{x}})^2=\frac{400}{x}\\y=\frac{400}{x}$