A consumer consumes only 2 goods x and y her money income is rs 4 and rs 2 respectively. Can the consumer afford a bundle 4x and 5y explain
Answers
Answered by
9
Dear student,
Given,
Money Income (M)= Rs 24
Px= Rs 4
Py= Rs 2
In response to the first part of your query, the consumer can not afford the bundle 4X and 5Y as this bundle exceeds the given money income of the consumer. We can show the same with the help of the budget line equation i.e.
Px×Qx+Py×Qy=MIn case of the bundle 4X and 5Y,4×4+2×5=26>24 (given money income)
Hence, the consumer cannot afford this bundle.
In response to the second part of the query, a consumer attains equilibrium at a point where the slope of the budget line is equal to the slope of indifference curve i.e.
∣∣−PxPy∣∣=∣∣MRSxy∣∣∣∣−42∣∣=MRSxyHence at equilibrium, MRSxy=2
REGARDS
Given,
Money Income (M)= Rs 24
Px= Rs 4
Py= Rs 2
In response to the first part of your query, the consumer can not afford the bundle 4X and 5Y as this bundle exceeds the given money income of the consumer. We can show the same with the help of the budget line equation i.e.
Px×Qx+Py×Qy=MIn case of the bundle 4X and 5Y,4×4+2×5=26>24 (given money income)
Hence, the consumer cannot afford this bundle.
In response to the second part of the query, a consumer attains equilibrium at a point where the slope of the budget line is equal to the slope of indifference curve i.e.
∣∣−PxPy∣∣=∣∣MRSxy∣∣∣∣−42∣∣=MRSxyHence at equilibrium, MRSxy=2
REGARDS
Answered by
3
As per the given question,
Money income of the consumer is = Rs. 24.
The things purchased by him is 4x and 5y.
The value of x is Rs. 4 and y is Rs.2.
Thus, the money required to purchase the goods=
4x +5y
=4x4 +5x2
= 16+10
=26.
The money available with him is Rs. 24 and the money required by him Rs. 26.
Hence, he cannot afford the bundle.
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