Answer to Question #178847 in Microeconomics for dekay

Question

Assume that the data in Table 1.1 will give rise to an indifference curve for Ahmad involving two goods A and B. Table 1.1 Units of A Units of B 16 6 12 8 8 12 4 24 a) Graph the indifference curve for Ahmad with A on the horizontal axis and B on the vertical axis. b) Assuming that the prices of A and B are Rs.1.5 and Rs.1 respectively and that Ahmad has Rs.24 to spend, add the resulting budget line to your graph. c) Given (a) and (b), what combination of A and B will maximize consumer satisfaction. Explain. d) Find the MRS between all consecutive points on the indifference curve. [Hint: recall MRS is the slope of the indifference curve and slope equals ΔY/ΔX. Here Y is commodity A and X is commodity B]

Answer 1

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