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In: Economics

A consumer spends all her income on food and clothing. At the current prices, the price...

  1. A consumer spends all her income on food and clothing. At the current prices, the price of food is K10 and the price of clothing is K5, she maximizes her utility by purchasing 20 units of food and 50 units of clothing.(a) What is the consumer’s income? What is the consumer’s MRS of food for clothing at the equilibrium position?

Solutions

Expert Solution

a) Consumers income is 10 x 20 = 200 + 5 x 50 = 250. total income will be K450.

b) Marginal rate of substitution will be 20 /50 or 2/5. marginal rate of substitution is Dx/ Dy.

Rahul Sunny answered 2 years ago
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