Suppose you are given the following information for a particular individual consuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200. a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possible consumptions of a and b? b) What is the MRSab for the two goods? c) Is this person maximizing her utility? How can you tell? d) Should she consume more of good a or of b? Explain. e) Why can’t you tell what her optimal bundle is? Explain.
Suppose you are given the following information for a particular individual consuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200. a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possible consumptions of a and b? b) What is the MRSab for the two goods? c) Is this person maximizing her utility? How can you tell? d) Should she consume more of good a or of b? Explain. e) Why can’t you tell what her optimal bundle is? Explain.
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter6: Consumer Choice Theory
Section: Chapter Questions
Problem 25SQ
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Suppose you are given the following information for a particular individual
consuming two goods, a and b: Pa = $5, Pb = $6, MUa = 100, MUb = 200, and income (m) = $200.
a) Sketch the budget set. What is the slope of the Budget Line? What are maximal possible
consumptions of a and b?
b) What is the MRSab for the two goods?
c) Is this person maximizing her utility? How can you tell?
d) Should she consume more of good a or of b? Explain.
e) Why can’t you tell what her optimal bundle is? Explain.
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