Answered: more Y and less X the same amount of X…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Hello,

I need assistance in working this through, step by step. I understand the MRS concept, but need help in the algebra to solve it

Given the following utility function:

U = 100X0.25Y0.25

and marginal rate of substitution:

MRS = −0.25Y0.25X

A consumer facing the following prices:

Px =$10,

Py= =$2

chooses to consume: 5 units of good X and13units of good Y.

Given this consumption bundle, the marginal rate of substitution is equal to -??
(Round your answer to two decimal places. Note that the minus sign is already included.).

Given this value, the consumer should consume

▼

more Y and less X

the same amount of X and Y

more X and less Y

in order to maximize his/her utility.

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