Question: A consumer has $400 to spend on goods X and Y. The market prices of these two goods are Px = $10 and Py =

A consumer has $400 to spend on goods X and Y. The market prices of these two goods are Px = $10 and Py = $40.
a. What is the market rate of substitution between goods X and Y?
b. Illustrate the consumer’s opportunity set in a carefully labeled diagram.
c. Show how the consumer’s opportunity set changes if income increases by $400. How does the $400 increase in income alter the market rate of substitution between goods X and Y?

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