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ne slope əpna əl c. What is the slope of the indifference b. IS curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)

ne slope əpna əl c. What is the slope of the indifference b. IS curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)

Micro Economics For Today
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 3SQP
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1. Suppose there are only two goods in the world, apples, and oranges. The price of an apple is Pa=2 and the price of an orange is Po=3. Assume there is an individual with the following utility function u = 2xa + 0.5xo The income available for this individual is (=120 (marginal utility for apples is 4x a and marginal utility for oranges is xo) a. Draw the budget line for this individual. Make sure to label the corner points correctly (the points where the budget line touches the x and y axes). b. What is the slope of the budget line? c. What is the slope of the indifference curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)
Transcribed Image Text:1. Suppose there are only two goods in the world, apples, and oranges. The price of an apple is Pa=2 and the price of an orange is Po=3. Assume there is an individual with the following utility function u = 2xa + 0.5xo The income available for this individual is (=120 (marginal utility for apples is 4x a and marginal utility for oranges is xo) a. Draw the budget line for this individual. Make sure to label the corner points correctly (the points where the budget line touches the x and y axes). b. What is the slope of the budget line? c. What is the slope of the indifference curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)
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