In: Economics
Consider the following utility function:
U = 100X0.10 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.