Question: (20 points) Let (x1, x2) be some interior bundle on the budget constraint, and supposep1= 4 andp2= 2. If the marginal rate of substitution at
- (20 points) Let (x1, x2) be some interior bundle on the budget constraint, and supposep1= 4 andp2= 2. If the marginal rate of substitution at (x1, x2) is -3, then is (x1, x2) optimal? Explain why or why not, and justify your answer with economic intuition. (Partial credit for a purely graphical argument.)
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock
