1A.4 Assume Alex is a rational consumer who consumes only two goods—bananas (B) and walnuts (W). Assume that his marginal rate of substitution of bananas for walnuts is given by the following formula:

MRS = MUW/MUB = B/W That is, Alex’s MRS is equal to the ratio of the number of bananas consumed to the number of walnuts consumed.

a. Assume that Alex’s income is $200, the price of bananas is $20, and the price of walnuts is $10. What quantities of bananas and walnuts will he consume?

b. Find two additional points on his demand curve for walnuts

(PW = $20 and PW = $4).

c. Sketch one of the equilibrium points on an indifference curve graph.