A consumer must divide $ 600 between the consumption of product X and product Y. The relevant

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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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Managerial Economics and Business Strategy

ISBN: 978-0073523224

8th edition

Authors: Michael Baye, Jeff Prince

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Question Posted: Apr 18, 2014 08:59 AM

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A consumer must divide $ 600 between the consumption of product X and product Y. The relevant

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a The consumers budget line is 600 10 X 40 Y Rearranging terms and solving fo...View the full answer

Managerial Economics and Business Strategy

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