Question

Juice 20 15 13- 10 40 Snacks 20 57 10 The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines 8 resulting from different prices for snacks assuming he has $20 to spend on these goods. What is MRS for the point on Bobby's demand curve for snacks where price of snacks is $0.5? A) -1 B) -0.5 C) -2 D) Not enough information

Answer 1

8. Option B -0.5

MRS = -p1/p2 = -(1/q1)/(1/q2) =-(20/40)/(20/20) = -0.5/1.0 = -0.5

9. Option B Ham is an inferior good.

With in the decrease in demand of pork (due to increase in price), the demand for Ham increases.