1 Question 1

For each of the following 3 situations:

a) find the Marginal Rate of Substitution (MRS) at the given bundle

b) use a graph to indicate the given bundle; accurately draw the indifference curve that

goes through the bundle and label the amount of utility. Draw at least 2 other points on the indifference curve.

Be sure to label your graph carefully and accurately. You will need to draw your graph to scale! In all

cases, put the amount of good X on the horizontal axis and the amount of good Y on the vertical axis.

1.1 The consumer's utility function is given byU(X, Y) =MIN(3X,4Y) & the given bundle isX= 2, Y= 1.

1.2 The consumer's utility function is given byU(X, Y) = 4X+ 3Yand the given bundle isX= 2, Y= 4.

Question 2 For each of the following situations, draw the consumer's budget constraint and indicate the consumer'soptimal bundle on the budget constraint.Make sure your graph is accurate (drawn to scale) and clearlylabeled.

2.1U(X, Y) =MIN(5X,3Y).The consumer has$24 to spend & the prices arePX= $3, PY= $1.

2.2U(X, Y) =X^1/4Y^3/4.The consumer has$36 to spend and the prices of the goods arePX= $2, PY= $3.

2.3U(X, Y) = 5X+ 3Y.The consumer has$24 to spend & the prices arePX= $6, PY= $4.