Answer to Question #288185 in Microeconomics for Hau alphonce

Question

Geoffrey has an income of $3000. Wine costs $3 per glass, and cheese costs $6 per pound. Draw the consumer’s budget constraint. What is the slope of this budget constraint? What is the MRS of the two goods? How is the MRS related to the slope of consumer’s budget constraint?

Answer 1

The consumer’s budget constraint is:

3Qw + 6Qc = 3000 or Qw = 1000 - 2Qc.

It can be drawn as a downward-sloping line.

The slope of this budget constraint is -2, if Qc is on the x-axis.

The MRS of the two goods is MRScw = -2. The MRS os the same as the slope of consumer’s budget constraint.