Suppose a consumer wants to buy a new house and has a budget of 50 million. The consumer cares only about the size (S) of the house and the quality of construction (Q) of the house. Assume that if the consumer wants one more unit of size, then the builder wants 10 million. If the consumer wants one more unit of quality, then the builder wants 5 million. (a) Draw the consumer's budget line for size and quality. Place size on the horizontal axis. (b) Suppose the consumer's preferences are such that the marginal rate of substitution is equal to (-4S)/Q. What value of each index will the consumer like to have in her house? (

Suppose a consumer wants to buy a new house and has a budget of 50 million. The consumer cares only about the size (S) of the house and the quality of construction (Q) of the house. Assume that if the consumer wants one more unit of size, then the builder wants 10 million. If the consumer wants one more unit of quality, then the builder wants 5 million. (a) Draw the consumer's budget line for size and quality. Place size on the horizontal axis. (b) Suppose the consumer's preferences are such that the marginal rate of substitution is equal to (-4S)/Q. What value of each index will the consumer like to have in her house? (

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter12: Labor Markets And Labor Unions

Section: Chapter Questions

Problem 3QFR

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