25. Imagine a consumer who spends her income (y) entirely on apples and ba- nanas. Apples are plotted on the horizontal axis, bananas on the vertical. Let Pa and P, denote the prices of apples and bananas. At an interior solution to the consumer's utility-maximization problem, the consumer's marginal rate of substitution is
25. Imagine a consumer who spends her income (y) entirely on apples and ba- nanas. Apples are plotted on the horizontal axis, bananas on the vertical. Let Pa and P, denote the prices of apples and bananas. At an interior solution to the consumer's utility-maximization problem, the consumer's marginal rate of substitution is
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 3SQP
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Utility maximization occurs when marginal rate of substitution is equal to slope of the budget constraint.
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