Question

A consumer spends all of her income​(Y) on two goods Z and B.The price of good B ​(PB​) is $6. The Marginal Rate of Transformation MRT is equal to −2. That is 2 units of good B can be traded for 1 unit of good Z.This consumer is able to buy 18 units of good Z and 0 units of good B with​ his/her income. What is this​ consumer's level of​ income?
The​ consumer's income is ​$ ( )​(round your answer to the nearest ​penny).

Answer 1

Answer:

The consumer's income is $216.

Explanation:

A consumer consumes two goods Z and B.  

The price of good B is $6.  

The consumer is consuming 18 units of good Z and 0 units of good B.  

The marginal rate of transformation is the ratio of the price of two goods.  

The marginal rate of transformation is -2.  

MRT = $\frac{Pz}{Pb}$

2 = $\frac{Pz}{6}$

Pz = 12

The budget constraint will be  

= $12\ \times\ 18\ +\ 6\ \times\ 0$\

= $216