Mitchell's money income is $150,the price of X is $2,and the price of Y is $2.Given these prices and income,Mitchell buys 50 units of X and 25 units of Y.Call this combination of X and Y bundle J.At bundle J,Mitchell's MRS is 2.At bundle J,if Mitchell increases consumption of Y by 1 unit,how many units of X can he give up and still reach the same level of utility?
A) ½
B) 1
C) 2
D) 4

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. An MRS of 2 means Mitchell is willing to give up 2 units of X for 1 additional unit of Y to maintain the same utility level. Therefore, if he increases Y by 1 unit, he can give up ½ unit of X.

Mitchell's Money Income Is $150,the Price of X Is $2,and