9 Consider a consumer who each week purchases two goods, X and Y The following table shows three different combinations of the two goods that lie on three of her indifference curves—A, B, and C Indifference Curve Quantities of goods X and Y, respectively Quantitities of goods X and Y, respectively Quantities of goods X and Y, respectively A unit of X and of Y units of X and of Y units of X and of Y B unit of X and of Y units of X and of Y units of X and of Y C units of X and of Y units of X and of Y units of X and of Y With good X on the horizontal axis and good Y on the vertical axis, draw the implied indifference curves Be sure to label all curves and axes completely On Curve A, what is the marginal rate of substitution (MRS) between the first two combinations of goods X and Y? Suppose this consumer has $500 available to spend on goods X and Y and that each costs $100 Add her budget line to the graph you drew in part (a) What is the slope of the budget line? What is the utility-maximizing combination of goods X and Y for this consumer? (Assume in this exercise that the utilitymaximizing combination always occurs at one of the combinations shown in the table.) What is the MRS at the utility-maximizing combination? Now suppose the price of good X falls to $50 Draw the new budget line onto your graph and identify the utilitymaximizing combination What is the MRS at the utilityAttributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 409