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A consumer consumes two goods .His incom...

A consumer consumes two goods .His income is Rs.50.`P_x`=Rs.8 each and `P_y`=Rs.5 each . Can he buy
(i)4 units of x and 3 unit of y ?
(ii)5 units of x and 2 units of y ?
(iii)Find `MRS_(xy)` at the point of equilibrium.

Text Solution

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The correct Answer is:
N/a
(i)4 units of x and 3 units of y
4 x Rs.8 + 3 x Rs.5
Rs.32+Rs.15 =Rs.47 `ne` 50, not in equilibrium
(ii)5 units of x+2 units of y
5 x Rs.8 +2 x Rs.5
Rs.40+Rs.10=Rs.50
Expenditure=Income, here the consumer is in equilibrium.
(iii)Consumer is in equilibrium where
`P_x/P_y=MRS_(xy)`
So `MRS_(xy)=(Rs.8)/(Rs.5)=1.6`
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