Question
Assume that Jim is a rational consumer who consumes only two goods, apples (A) and nuts (N). Assume that his marginal rate of substitution of
Assume that Jim is a rational consumer who consumes only two goods, apples (A) and nuts (N). Assume that his marginal rate of substitution of apples for nuts is given by the following formula: MRS= MUn/MUa = A/N. That is, Jim's MRS is equal to the ratio of the number of apples consumed to the number of nuts consumed.
a. Assume that Jim's income is $100, the price of nuts is $5 and the price of apples is $10. What quantity of apples and nuts will he consume?
b. Find two additional points on his demand curve (price of nuts=$10 and price of nuts=$2)
c. Sketch one of the equilibrium points on an indifference curve graph.
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