Joe's income is $500,the price of food (F)is $2 per unit,and the price of shelter (S)is $100.Which of the following represents his marginal rate of transformation of food for shelter?

Question

Quizplus · Accepted Answer

The formula for the marginal rate of transformation of food for shelter is the change in food divided by the change in shelter (-ΔF/ΔS). Since the price of food is constant at $2 per unit, we can use Joe's income and the price of shelter to calculate the maximum amount of shelter he can afford: $500 - $2F = $100S. Solving for F, we get F = 200 - 0.2S. Taking the derivative of this equation with respect to S gives us -0.2, which represents the change in food for a one-unit increase in shelter. Therefore, the marginal rate of transformation of food for shelter is -0.2/-1 = 0.2, or -50 when expressed as a ratio.

Joe's Income Is $500,the Price of Food (F)is $2 Per