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corie corie
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6 years ago
George has a fixed income and can afford at most 7 units of X if he spends his entire income on X.  Alternatively, if he spends all his income on Y, he can afford at most 6 units of Y.   Draw George's budget line and an indifference curve such that George chooses to buy 4 pieces of X.  Martha has the same income and faces the same prices, yet she chooses to buy 2 pieces of X. In equilibrium, what is George's subjective value of X in terms of Y?  What is Martha's?
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Microeconomics

Microeconomics


Edition: 8th
Author:
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#1
6 years ago
In equilibrium, one unit of X will be worth 6/7 units of Y for both George and Martha.  The reason is that each consumer choices a consumption bundle so that MRS is equal to the price ratio.
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