Question

If Ann's marginal rate of substitute of X for Y is 5 - that is, MUx / MUy = 5

The price of X is $9 and the price of Y is $2 she is spending too much of her income on Y.

Do you agree or disagree? Explain your answer using a graph

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Answer 1

Answer:

Given , \(MU_x\) / \(MU_y\) = 5 \(P_y\) =$2 and \(P_x=9\) In Equilibrium we have \(MU_x\over MU_y\) = \(P_x\over P_y\) This condition makes good economic