Nicole's income is $1,000 per month.She spends all of it on shoes (S)and books (B).Shoes cost $50 and books cost $25.Her marginal rate of substitution for shoes with books is MRS_SB = 2B/3S.Illustrate her utility-maximizing combination of shoes and books and draw her price-consumption curve if the price of books rises to $30.
B. M = P_S (2/3)(P_B/P_S)B + P_BB, which implies B = (3/5) (M/P_B ) =
B. When P_B = $30, B = 20. The new utility-maximizing combination of books and shoes is represented by point b in Figure 5.13. Connecting points a and b gives the price-consumption curve.

Question

Quizplus · Accepted Answer

The Answer of Nicole's income is $1,000 per month.She spends all of it on shoes (S)and books (B).Shoes cost $50 and books cost $25.Her marginal rate of substitution for shoes with books is MRS_SB = 2B/3S.Illustrate her utility-maximizing combination of shoes and books and draw her price-consumption curve if the price of books rises to $30. B. M = P_S (2/3)(P_B/P_S)B + P_BB, which implies B = (3/5) (M/P_B ) = B. When P_B = $30, B = 20. The new utility-maximizing combination of books and shoes is represented by point b in Figure 5.13. Connecting points a and b gives the price-consumption curve.

Nicole's Income Is $1,000 Per Month