The prices of goods x and y are each $1.Jane has $20 to spend and is considering choosing 10 units of x and 10 units of y.Jane has nice convex preferences and more of each good is better for her.Where x is drawn on the horizontal axis and y is drawn on the vertical axis, the slope of her indifference curve at the bundle (10, 10)is -2.
A)The bundle (10, 10)is the best she can afford.
B)She would be better off consuming more of good x and less of good y.
C)She would be better off consuming more of good y and less of good x.
D)She must dislike one of the goods.
E)More than one of the above is true.

Question

Quizplus · Accepted Answer

The slope of the indifference curve at (10, 10) is -2, meaning Jane is willing to give up 2 units of y for 1 additional unit of x. Since the price ratio is 1:1, she should consume more x and less y to increase her utility.

The Prices of Goods X and Y Are Each $1