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ou, a consumer, live in a world with two goods, x and y. Quantities of the goods are called qx and qy . Your utility
ou, a consumer, live in a world with two goods, x and y. Quantities of the goods are called qx and qy . Your utility function over bundles is the function u(qx, qy ) = aqx +cqy . a and c are both positive numbers that you know, but we are leaving them as variables so that we can think about how they affect your demand. The price of good x is px, the price of good y is py , and your income is I. (a) Whatever a and c are, your indifference curves are straight lines, so you have the same marginal rate of substitution at all bundles. Find your marginal rate of substitution, as a function of a and c. (b) In general, your marginal rate of substitution will not be equal to the slope of your budget line. One possibility is that your indifference curves are steeper than your budget line; this would mean that your marginal rate of substitution is a larger number in absolute value (i.e., without the negative sign) than the slope of your budget line in absolute value (also without the negative sign). Write a mathematical inequality, with a, c, px, and
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