Chapter 10.A, Problem 7P

To determine

Concept Introduction:

Marginal Rate of Substitution: It is defined as the quantity of goods sacrificed for an additional unit of another good. The formula for it is:

Here,

• is the marginal rate of substitution of and
  
• is the marginal utility of
  
• is the marginal utility of
  

Optimality Rule: According to the indifference curve approach, the consumer achieves its optimum bundle at a appoint where

Here,

• is the quantity of good X.
  
• is the quantity of good Y.
  
• is the total income.
  
• is the price of good X.
  
• is the price of good Y.