Summary 10 Example 4.13 Figure E4.13 shows a budget line drawn along an indifference curve for...

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Summary 10 Example 4.13 Figure E4.13 shows a budget line drawn along an indifference curve for a con sumer who is primarily interested in two goods, X and Y. If the price of Good X is $50/unit: (a) What is the consumer's income? (b) What is the price of Good Y? (c) What is the equation of the budget line? (d) Find the MRS at equilibrium. Good Y 60 40 50 v=200 B Good X 100 Figure E4.13 Budget and indifference curve Solution (a) The consumer's income (or budget) for these two goods must be 100 x 50-$5.000 because she can afford to buy 100 units @ $50/unit of Good X if she does not choose to buy any units of Good Y. (b) The price of Good Y per unit must be 5000/80 = $62.50 (c) The equation for the budget line: P.X+P,Y=Iwhere I = Income for the two goods 50X+62.5Y 5,000 (d) At equilibrium, MRS 50 = 0.8 P 62.5 SUMMARY Econo jose to allocate their scarce resources. Microeconom ne behavior of individual firms and applies it to bu nand, supply, elasticity, consumers' surplus, and lat Summary 10 Example 4.13 Figure E4.13 shows a budget line drawn along an indifference curve for a con sumer who is primarily interested in two goods, X and Y. If the price of Good X is $50/unit: (a) What is the consumer's income? (b) What is the price of Good Y? (c) What is the equation of the budget line? (d) Find the MRS at equilibrium. Good Y 60 40 50 v=200 B Good X 100 Figure E4.13 Budget and indifference curve Solution (a) The consumer's income (or budget) for these two goods must be 100 x 50-$5.000 because she can afford to buy 100 units @ $50/unit of Good X if she does not choose to buy any units of Good Y. (b) The price of Good Y per unit must be 5000/80 = $62.50 (c) The equation for the budget line: P.X+P,Y=Iwhere I = Income for the two goods 50X+62.5Y 5,000 (d) At equilibrium, MRS 50 = 0.8 P 62.5 SUMMARY Econo jose to allocate their scarce resources. Microeconom ne behavior of individual firms and applies it to bu nand, supply, elasticity, consumers' surplus, and lat Summary 10 Example 4.13 Figure E4.13 shows a budget line drawn along an indifference curve for a con sumer who is primarily interested in two goods, X and Y. If the price of Good X is $50/unit: (a) What is the consumer's income? (b) What is the price of Good Y? (c) What is the equation of the budget line? (d) Find the MRS at equilibrium. Good Y 60 40 50 v=200 B Good X 100 Figure E4.13 Budget and indifference curve Solution (a) The consumer's income (or budget) for these two goods must be 100 x 50-$5.000 because she can afford to buy 100 units @ $50/unit of Good X if she does not choose to buy any units of Good Y. (b) The price of Good Y per unit must be 5000/80 = $62.50 (c) The equation for the budget line: P.X+P,Y=Iwhere I = Income for the two goods 50X+62.5Y 5,000 (d) At equilibrium, MRS 50 = 0.8 P 62.5 SUMMARY Econo jose to allocate their scarce resources. Microeconom ne behavior of individual firms and applies it to bu nand, supply, elasticity, consumers' surplus, and lat