Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

e) The equation for your indifference curve through the point (4,6) isxg, = f) You currently have the bundle (rmxb) = (4,6). Your roommate wants

image text in transcribed
e) The equation for your indifference curve through the point (4,6) isxg, = f) You currently have the bundle (rmxb) = (4,6). Your roommate wants to give you 9 bananas in return for 3 apples. Should you accept the offer? 9) Mark the bundle (1,15) on the graph. h) Your friend tells you, " Your marginal rate of substitution is -2, which means that for an extra apple, you should be willing to trade two bananas. I am offering 3 bananas for every apple of yours. Since I am offering more than your marginal rate of substitution, you should accept my offer." You reply, "You're right that my MRS is -2. But MRS holds only for small trades where the change in apples is small. Your offer of 9 bananas for 3 apples is too big of a trade. You see, my indifference curve is not a straight line." Given this conversation between you and yourfriend, would you be willing to give up 1 apple for 3 bananas? i) Would you be willing to give up 2 apples for 6 bananas? j) On the graph, draw a line with slope -3 through the point (4,6). This line shows all bundles that you should be willing to trade at the rate of 1 apple for 3 bananas. Label the segment of the line that represents trades that make you better of than without trade

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals of Cost Accounting

Authors: William Lanen, Shannon Anderson, Michael Maher

4th edition

78025524, 978-0078025525

Students also viewed these Economics questions

Question

Contrast Adlers and Freuds approaches to motivation.

Answered: 1 week ago