Given that income is $750 and P_X = $32 and P_Y = $8,what is the market rate of substitution between goods X and Y? A) -0.75 B) -3 C) -4 D) -25

Question

Quizplus · Accepted Answer

The market rate of substitution (MRS) between goods X and Y can be calculated as the ratio of the marginal utility of X over the marginal utility of Y (-MUx/MUy).

Since we don't have the marginal utilities, we can use the price ratio as an estimate of the MRS. In this case, the price of X is 4 times the price of Y (32/8 = 4), which suggests that consumers are willing to give up 4 units of Y for 1 unit of X.

Therefore, the market rate of substitution between goods X and Y is -4, indicating that the consumer is willing to give up 4 units of Y to acquire 1 additional unit of X.

As for the best choice(s), it depends on the consumer's preferences and budget constraints, which are not provided in the information given.

Given That Income Is $750 and PX = $32 and PY

Given That Income Is $750 and P_X = $32 and P_Y