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Unformatted text preview: of the marginal utilities of the two goods: MRS = = 2. Let’s solve for and so rearrange the budget constraint in terms of : 3. We know that the MRS is equal to the price ratio of the two goods, so we can plug this into our budget constraint as follows: 4. Then we can just solve through for: 5. If you follow the same steps for Good, you will be able to findquite easily....
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 Fall '10
 bowmaker
 Economics, Microeconomics, Utility, Professor Bowmaker Handout

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