1. Consider the following budget constraint for goods X and Y, given income and prices Px and Py, along with the given i

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1 Consider The Following Budget Constraint For Goods X And Y Given Income And Prices Px And Py Along With The Given I 1 (71.67 KiB) Viewed 103 times

1. Consider the following budget constraint for goods X and Y, given income and prices Px and Py, along with the given indifference curve describing a consumer's preferences over goods X and Y: Budget Constraint: I = P.X+PWY Y a. Does either labeled combination, A or B, provide the consumer with more utility than the other? Explain (5 points) b. Suppose that the Marginal Rate of Substitution at point B is 0.5. Is the ratio of Px to Py larger or smaller than 0.5? Explain. (5 points) C. Provide a brief explanation for why point B is not the utility-maximizing combination of X and Y for this consumer, given this income and these prices. (5 points) d. Provide a brief explanation for why point B is not the cost-minimizing combination of X and Y for achieving utility level U, given these prices. (5 points)