Question
Asked Oct 1, 2019
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16. Linda consumes two goods: x and y, has preferences that are smooth
(utility maximi zation is characterized by the tangency rule), and
income Y=$150.
If px $25 and py $5, what is the marginal rate of
substitution for Linda at her optimal bundle?
5 x
5y
150
+
a. -1/2
b. 1/5
C. -3
d. 7/2
e. 5
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16. Linda consumes two goods: x and y, has preferences that are smooth (utility maximi zation is characterized by the tangency rule), and income Y=$150. If px $25 and py $5, what is the marginal rate of substitution for Linda at her optimal bundle? 5 x 5y 150 + a. -1/2 b. 1/5 C. -3 d. 7/2 e. 5

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Expert Answer

Step 1

Marginal rate of Substitution: In economics, the marginal rate of substitution states the point at which consumer is willing to give up one commodity for the consumption of another commodity.

Step 2

Option E, 5 is the correct answer:

Marginal rate of substitution = Px...

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