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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 9
Simple utility maximization requires MRS = Px/Py.
1. Why does the price ratio Px/Pyshow the rate at which any person can trade Yfor X in ''the market''? Illustrate this principle for the case of music CDs (which cost $10 each) and movie DVDs (which cost $17 each).
2. If an individual's current stock of CDs and DVDs yields him orheran MRSof 2-to-1 (that is, he or she is willing to trade two CDs for one DVD), how should consumption patterns be changed to increase utility?
1. Why does the price ratio Px/Pyshow the rate at which any person can trade Yfor X in ''the market''? Illustrate this principle for the case of music CDs (which cost $10 each) and movie DVDs (which cost $17 each).
2. If an individual's current stock of CDs and DVDs yields him orheran MRSof 2-to-1 (that is, he or she is willing to trade two CDs for one DVD), how should consumption patterns be changed to increase utility?
Explanation
Verified
Verified
1) The ratio of price 
is the slope of t...
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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