Monica consumes only goods A and B. Suppose that her marginal utility from consuming good A is equal to 1/A, and her marginal utility from consuming good B is 1/B. Assume the price of A is $0.50, the price of B is $4.00, and Monica's income is $120.00. Assume A is on the x axis. At a bundle, A=1, B=2, Monica's MRS is 2 v. At this bundle, Monica should Monica should optimally buy 120 v units of good A and 15 v units of good B.

Microeconomics
13th Edition
ISBN:9781337617406
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter7: Consumer Choice: Maximizing Utility And Behavioral Economics
Section: Chapter Questions
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Monica consumes only goods A and B. Suppose that her marginal utility from consuming good A is equal to 1/A, and her marginal utility
from consuming good B is 1/B. Assume the price of A is $0.50, the price of B is $4.00, and Monica's income is $120.00. Assume A is on
the x axis.
At a bundle, A=1, B=2, Monica's MRS is 2
v. At this bundle, Monica should
Monica should optimally buy 120
v units of good A and
15
v units of good B.
Transcribed Image Text:Monica consumes only goods A and B. Suppose that her marginal utility from consuming good A is equal to 1/A, and her marginal utility from consuming good B is 1/B. Assume the price of A is $0.50, the price of B is $4.00, and Monica's income is $120.00. Assume A is on the x axis. At a bundle, A=1, B=2, Monica's MRS is 2 v. At this bundle, Monica should Monica should optimally buy 120 v units of good A and 15 v units of good B.
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