L4 BUDGET CONSTRAINT SLIDES

L4 BUDGET CONSTRAINT SLIDES - of the marginal utilities:...

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BUDGET CONSTRAINT SLIDES I = income available for expenditure Px = price of one unit of X Py = price of one unit of Y X = quantity of good X consumed Y = quantity of good Y consumed I = Px X + Py Y Y = (I/Py) - (Px /Py) X I/Py is the intercept of the budget line -Px/Py is the slope of the budget line Recall that the MRS equals the ratio
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Unformatted text preview: of the marginal utilities: MRS = [ U/ X] / [ U/ Y] = MUx/MUy And the MRS = MUx/MUy = Px/Py Therefore, MUx/Px = MUy/Py The extra utility per dollar cost is the same for both goods X Y 16 16 A 8 8 B 10 +2-2 6 X Y 16 16 M X Y A 8 8 16 16 10 20 30 40 X Y 16 16 A 8 8 10 +2-2 6 30 B* +1 11 M M M...
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L4 BUDGET CONSTRAINT SLIDES - of the marginal utilities:...

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