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Consumer Theory (15 points, 3 points per game) Suppose that the consumer whose preferences are illustrated in the graph below has an income M=1750C$ and
Consumer Theory (15 points, 3 points per game) Suppose that the consumer whose preferences are illustrated in the graph below has an income M=1750C$ and that the price of the two goods he consumes is respectively Px =35C$ and PY=10C. Answer the following questions using the information in Figure 2. a. Which point in Figure 2 corresponds to the optimal consumption basket of this coommator? Explain youranswer clearly. b. Set and calculate the marginal rate of substitution (MSR) at this point. c. Ifthis sameconsumer now has an equal income of C$700 and faces prices d. Px=14C and Py=2C$, how well does his new optimal consumption basket fit? Justify your answer. e. Imagine that consumer is at point D. What is his income if PY=C$10
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