Question

A consumer buys two goods ice cream and banana. Their prices are Rs.12 and Rs. 4 per unit respectively calculate marginal rate of substitution at equilibrium point.
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Answer 1

Explanation:

answer it says 48 I think it helps you

Answer 2

Given:

A consumer buys two goods ice cream and banana. Their prices are Rs.12 and Rs. 4 per unit respectively

To find:

Calculate marginal rate of substitution at equilibrium point.

Solution:

From given, we have,

A consumer buys two goods ice cream and banana. Their prices are Rs.12 and Rs. 4 per unit respectively

First of all, let us understand the meaning of the marginal rate of substitution.

MRS is the rate at which a consumer is willing to give up one goods for an extra unit of other goods without affecting the satisfaction of the consumer.

So, the marginal rate of substitution in the case of the ice cream and the banana is given as follows.

MRS = P_{ice} / P_{banans}

= 12/4

= 3/1

Therefore, the marginal rate of substitution at equilibrium point is 3 : 1