Question

A consumer must divide $ 600 between the consumption of product X and product Y. The relevant market prices are Px = $10 and Py = $40.
a. Write the equation for the consumer’s budget line.
b. Illustrate the consumer’s opportunity set in a carefully labeled diagram.
c. Show how the consumer’s opportunity set changes when the price of good X increases to $ 20. How does this change alter the market rate of substitution between goods X and Y?



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  • CreatedApril 18, 2014
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