ne slope əpna əl c. What is the slope of the indifference b. IS curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)
ne slope əpna əl c. What is the slope of the indifference b. IS curve (MRS)? d. Write the intuition behind the MRS (in terms of the substitutability of apples and oranges)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![1. Suppose there are only two goods in the
world, apples, and oranges. The price of an
apple is Pa=2 and the price of an orange is
Po=3. Assume there is an individual with the
following utility function u =
2xa + 0.5xo
The income available for this individual is
(=120 (marginal utility for apples is 4x a and
marginal utility for oranges is xo)
a. Draw the budget line for this individual.
Make sure to label the corner points
correctly (the points where the budget
line touches the x and y axes).
b. What is the slope of the budget line?
c. What is the slope of the indifference
curve (MRS)?
d. Write the intuition behind the MRS (in
terms of the substitutability of apples
and oranges)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5afed65b-d942-4f3f-93a7-7be3b580b003%2F0b6af60b-8c8c-484f-ab3a-bfd181c4e30f%2Fq5lnsv_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1. Suppose there are only two goods in the
world, apples, and oranges. The price of an
apple is Pa=2 and the price of an orange is
Po=3. Assume there is an individual with the
following utility function u =
2xa + 0.5xo
The income available for this individual is
(=120 (marginal utility for apples is 4x a and
marginal utility for oranges is xo)
a. Draw the budget line for this individual.
Make sure to label the corner points
correctly (the points where the budget
line touches the x and y axes).
b. What is the slope of the budget line?
c. What is the slope of the indifference
curve (MRS)?
d. Write the intuition behind the MRS (in
terms of the substitutability of apples
and oranges)
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