Question

Charlie's utility function is U(A, B) = AB, where A and B are the numbers of apples and bananas, respectively, that he consumes. When Charlie is consuming 20 apples and 80 bananas, if we put apples on the horizontal axis and bananas on the vertical axis, the slope of his indifference curve at his current consumption is:____________a. -8.b. -1/4.c. -20.d. -4.e. -1/8.

Answer 1

Answer:

D. -4

Step-by-step explanation:

The formula for calculating the slope of his indifference curve at his current consumption is expressed as:

M = -∆y/∆x

∆y is the change in y axis

∆x is the change in x axis

Since apples are put in the horizontal axis, ∆x = 20

Since banana are on the y axis, then ∆y = 80

Substituting the given values into the formula

M = -80/20

M = -8/2

M = -4

Hence the slope of his indifference curve at his current consumption is -4.

Option D is correct.