Homework Answers
(1) At point A, MRS is equal to the ratio of prices.
At point A, consumer is spending all of his/her income but still there is a chance to consume on higher IC and get higher utility at the tangency between budget line and higher IC.
(2). Consumer will buy more of Y at the tangency between budget line and higher IC.
(3). Consumer maximize utility at the tangent point, occurs between budget line and IC.
So that at maximizing utility point, slope of IC (I e., MRS) and slope of budget line (i.e. Px / Py) is equal.
MRS = Px / Py
MRS = slope of budget line.
MRS= 10 / 5.
MRS = 2.
Thus, MRS will be 2 when the consumer is maximizing their utility.
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what's the MRS at her optimal consumption bundle?
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1.
answer it only numerical values.
2.
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Y. If the price of a X increases and the budget stays the same, the
utility maximizing person __________.
Cannot be determined from the information
will consume less of Y
will only consume Y
will consume less of both goods
will have lower utility
Sara has $40 in her budget. Given the following graph, what is the MRS of her...
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