That is it does not have to be true it is only true at the equilibrium If a

That is it does not have to be true it is only true

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9. D Here we are using the rule above and the budget constraint. The simplest way to do this is to start at consuming zero of both goods. Now divide both the MUs by 40 and 20, which one is higher? Buy that good { in this case the consumer would buy a t-shirt. Multiply the number of each good that you are buying and add them together. This must be less than $300 dollars. Now divide the MU of the second t-shirt by 20, is it bigger than 2.5? Yes, so consume a second t-
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# sweaters MU sweaters/price sweaters # t-shirts MU t-shirts/price t-shirts 1 2:5 1 7.5 2 2:25 2 6 3 2 3 4.5 4 1.75 4 3 5 1.5 5 1.5
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  • Winter '08
  • wadell
  • Utility, MUy

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