A consumer must divide $600 between the consumption of product X and product Y

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A consumer must divide $600 between the consumption of product X and product Y. The relevant market prices are Px = $10 and Py = $40.

a. Write the equation for the consumer’s budget line.


Y = [removed]+ [removed]X

b. In the graph below, illustrate the consumer’s opportunity set.  Show as graficly

 

c. In the same graph, Illustrate the consumer’s opportunity set when the price of good X increases to $20.



How does this change alter the market rate of substitution between goods X and Y?

It changes from -2 to -4.

It changes from -0.5 to -0.25.

It changes from -0.25 to -0.5.

It changes from -4 to -2.

 

  • 7 years ago
A consumer must divide $600 between the consumption of product X and product Y
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