Assume that an individual has convex indifference curves (i.e. diminishing MRS). Suppose the individual has $3 to spend on good #1 and good #2. In addition, suppose we know that at the bundle where q1=1 and q2=1, the marginal utility of good #1 is 2 utils and the marginal utility of good #2 is 1 util. Given this information, which set of prices would this individual prefer to face? A. p1=1 and p2=2 B. p1=2 and p2=1 C. p1=2 and p2=2
Assume that an individual has convex indifference curves (i.e. diminishing MRS). Suppose the individual has $3 to spend on good #1 and good #2. In addition, suppose we know that at the bundle where q1=1 and q2=1, the marginal utility of good #1 is 2 utils and the marginal utility of good #2 is 1 util. Given this information, which set of prices would this individual prefer to face? A. p1=1 and p2=2 B. p1=2 and p2=1 C. p1=2 and p2=2
Chapter6: Consumer Choice Theory
Section6.A: Indifference Curve Analysis
Problem 1SQ
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Assume that an individual has convex indifference
A. p1=1 and p2=2
B. p1=2 and p2=1
C. p1=2 and p2=2
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