Problem $04-01$

A consumer has $$300$ to spend on goods $x$ and $Y.$ The market prices of these two goods are $P_x=$$$15$ and $P_Y=$$$5.$

a$.$ What is the market rate of substitution between goods $x$ and $Y?$

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b$.$ In the graph below: $(1)$ Illustrate the consumer's opportunity set, and $(2)$ Illustrate the consumer's opportunity set for the case where income increases by $$300.$

Instruction: Graph both opportunity sets from where $x=0$ to where they cross the $x-$axis $($two points for each curve$).$

Opportunity Set

$($i$)$

points

a$.$ What is the market rate of substitution between goods $x$ and $Y?$

Opportunity Set

$140$

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