Consider the following utility function: U = 100X0.10 Y 0.75. A consumer faces prices of Px...

Consider the following utility function:

U = 100X^0.10 Y ^0.75.

A consumer faces prices of Px = $5 and Py =$5.
Assuming that graphically good X is on the horizontal axis and good Y is on the vertical axis, suppose the consumer

chooses to consume 7 units of good X and 15 units of good Y. Then the marginal rate of substitution6 is equal to:
MRS = . (Enter your response rounded to two decimal places. Do not forget to include the negative

sign.)
Use absolute values.

The consumer should consume (1) to maximize utility.

Expert Solution

Rahul Sunny answered 2 years ago

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