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Suppose a consumer has the utility function Ux y ryxy Recall that for this function the marginal utilities are given by

 Suppose a consumer has the utility function U(x, y) - ry+x+y. Recall that for this function the marginal utilities are given by MU (z, y) = y+1 and MU, (x, y-x+ 1. (a) What is the marginal rate of substitution MRSzy? (b) If the prices for the goods are pr-$2 and py-$4, and if the income of the consumer is M = $18, then what is the consumer's optimal affordable bundle? (c) What if instead the prices are pr-$3 and py-83 (and income is still M = $18)?

Apr 04 2020 View more View Less

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