Question: A consumer has 300 to spend on goods X

A consumer has $ 300 to spend on goods X and Y. The market prices of these two goods are Px = $ 15 and Py = $ 5.
a. What is the market rate of substitution between goods X and Y?
b. Illustrate the consumer’s opportunity set in a carefully labeled diagram.
c. Show how the consumer’s opportunity set changes if income increases by $ 300. How does the $ 300 increase in income alter the market rate of substitution between goods X and Y?


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  • CreatedApril 18, 2014
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