A consumer spends all her income on food and clothing. At the current prices of price of food = Rs. 10 and price of cloth = Rs. 5, she maximizes her utility by purchasing 20 units of food and 50 units of clothing.(Hint: Take food on x-axis and cloth on y-axis)
i) What is the consumer’s income?
ii) What is the consumer ‘s marginal rate of substitution of food for clothing at the equilibrium
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Expert's answer
2020-12-08T09:56:39-0500
i) The consumer’s income is:
"I = 10\u00d720 + 5\u00d750 = 450."
ii) The consumer ‘s marginal rate of substitution of food for clothing at the equilibrium is: "MRS = Px\/Py = 10\/5 = 2."
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