Samara's income is $30 a month and she spends all of it on music downloads and petrol. The price of a music download is $1.50 and the price of a litre of petrol is $3. At Samara's best affordable point, her marginal rate of substitution is _______ per litre of petrol.
A) 0.5 of a download
B) 1 download
C) 1.5 downloads
D) 2 downloads

Question

Quizplus · Accepted Answer

At the best affordable point, the marginal rate of substitution equals the price ratio. The price of petrol is $3 and the price of a music download is $1.50, so the MRS is 2 downloads per litre of petrol.

Samara's Income Is $30 a Month and She Spends All