A consumer must divide $600 between the consumption of product x and
A consumer must divide $600 between the consumption of product X and product Y. The relevant market prices are Px = $10 and Py = $40.
a. Write the equation for the consumer’s budget line.
Y = [removed]+ [removed]X
b. In the graph below, illustrate the consumer’s opportunity set. Show as graficly
c. In the same graph, Illustrate the consumer’s opportunity set when the price of good X increases to $20.
How does this change alter the market rate of substitution between goods X and Y?
It changes from -2 to -4.
It changes from -0.5 to -0.25.
It changes from -0.25 to -0.5.
It changes from -4 to -2.
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