Question

Given two goods named Omega & Alpha, with Omega along the vertical axis, and Alpha on the
horizontal. Assume that the budget is constant at 100 pesos, the price of good Omega is fixed at 5
pesos. The Price of Alpha changes from 1 peso to 2 pesos. What is the MRS after the price
increase in Alpha?
The sign will matter, give only in numerical form, no need for any word, give your answer in the
decimal form when applicable.

Answer 1

Marginal Rate of substitution is given by:

MRS= $\frac {\Delta y}{\Delta x} = \frac{5-0}{2-1}$

=5