Your budget constraint for the two goods A and B is 12A + 4B = I, where I is your income.You are currently consuming more than 27 units of B.In order to get 3 more units of A, how many units of B would you have to give up?
A)0.33
B)0.11
C)3
D)9
E)None of the above.

Question

Quizplus · Accepted Answer

To find out how many units of B need to be given up to get 3 more units of A, we need to calculate the marginal rate of substitution (MRS) between A and B, which is the ratio of their coefficients in the budget constraint. The MRS is 12/4 = 3. Therefore, for every additional unit of A, you need to give up 3 units of B. To get 3 more units of A, you need to give up 3 * 3 = 9 units of B.

Your Budget Constraint for the Two Goods a and B