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Mamont248 [21]
3 years ago
12

Suppose the price of Good X is $4 and the price of Good Y is $3. If a consumer has a Marginal Rate of Substitution (MRSxy) of 1

for the bundle they are considering, then given their budget constraint, the consumer
a. Cannot reach a higher level of utility given their budget constraint.
b. Would have a higher utility if they bought more of Good X.
c. Would have a higher utility if they bought less of Good X
Business
1 answer:
nexus9112 [7]3 years ago
4 0

Answer:

c. Would have a higher utility if they bought less of Good X

Explanation:

Since the marginal rate of substitution is -1, this means that at that point the consumer is indifferent between product X and product Y, but since product X is more expensive than product Y, he/she will increase their utility per dollar if at least one more unit of product Y is bought instead of one unit of product X.

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