The following graph shows a portion of a consumer?s indifference map. The consumer faces the budget line LZ, and the price of X is $20.a. The consumer?s income 5 $ ?____________.b. The price of Y is $ ____________.c. The equation for the budget line LZ is ____________.d. What combination of X and Y does the consumer choose? Why?e. The marginal rate of substitution for this combination is ____________.f. Explain in terms of MRS why the consumer does not choose either combination A or B.g. What combination is chosen if the budget line is MZ?h. What is the price of Y?

i. What is the price of X?j. What is the MRS in equilibrium?

Transcribed Image Text:

35 30 25 A 20 M 15 IV III 10 B II Z 0 5 10 15 20 25 30 35 40 Quantity of X Quantity of Y