Suppose that the marginal rate of substitution is 2, the price of X is $3, and the

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Suppose that the marginal rate of substitution is 2, the price of X is $3, and the price of Y is $1.
a. If the consumer obtains 1 more unit of X, how many units of Y must be given up in order to keep utility constant?
b. If the consumer obtains 1 more unit of Y, how many units of X must be given up in order to keep utility constant?
c. What is the rate at which the consumer is willing to substitute X for Y?
d. What is the rate at which the consumer is able to substitute X for Y?
e. Is the consumer making the utility-maximizing choice? Why or why not? If not, what should the consumer do? Explain.

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Marginal rate of substitutionMRS YX 2 Price of X 3 Price of y 1 A consumer face the budget constraint and thats why he have limited resources If he wants to increase the consumption of 1 commodity and he have to decrease the consumption of another commodity In this case consumer obtain 1 more unit of X so he have to give up Y commodity in order to keep utility constant MRS YX 2 Y1 Y 2 So he need to give up 2 units of Y commodity B In the same way MRS YX 2 1X X 12 So he need to give up 12 units of X commodity C The rate at which the consumer is willing to substitute X for Y is the marginal rate of substitution which is here 2 D The rate at which the consumer is able to substitute X for Y is the budget constrain ...View the full answer

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Sagar Kumawat

I am Sagar kumawat currently pursuing MA economics from Central University Of Rajashtan, I have completed my Under graduation in Economics Honours and secured 71%. Have keen interest in Research and policy making, currently working on one research topic of " universal basic income in India". In my spare time I spend my time in my hobbies like playing keyboard, dancing, Handball. Data science and economics enthusiast, have done various coursers to build more knowledge in these field. I have hand on experience on econometrics tools like Eviews, SPSS, MS excel. I am well versed in English speaking, communication and leadership qualities . Participate in lots of public speaking competitions like debates, extempore, poetry reciting and was winner of inter-level. I once was a economics tutor to one the prestigious coaching institute, where i teach the CA (chartered accountant) students. The course was comprehensive one, it provide overall knowledge of economics to them.

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