Managerial Economics & Business Strategy 7th Edition by Michael Baye, Stanley Brue, David MacPherson

تمرين 1

A consumer has $400 to spend on goods X and Y. The market prices of these two goods are P x = $10 and P y = $40.
a. What is the market rate of substitution between goods X and Y
b. Illustrate the consumer's opportunity set in a carefully labeled diagram.
c. Show how the consumer's opportunity set changes if income increases by $400. How does the $400 increase in income alter the market rate of sub­stitution between goods X and Y