Question

Q29. A consumer consumes only goods X
and Y both priced at Rs 8 per unit. If the
consumer chooses a combination of these
two goods with marginal rate of
substitution equal to 8, is the consumer's
equilibrium? Give reasons. Also explain,
what will a rational consumer do in this
situation? (2)

Answer 1

Explanation:

MRS = Px/Py

given that ,

MRS =8

Px/Py = 8/8 =1