Economics Today (19th Edition)
Economics Today (19th Edition)
19th Edition
ISBN: 9780134478777
Author: Roger LeRoy Miller
Publisher: PEARSON
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Chapter 20.F, Problem 8P
To determine

Illustrate Sue’s new budget constraint and indifferent curve in a diagram from the data in problem F-3, illustrate also the utility-maximizing combination of goods.

F-3 The table below represent Sue’s preferences for bottled water and soft drinks, the combination of which yields the same level of utility.

Combination of Bottled Water and Soft Drinks Bottled Water per Month Soft Drinks per Month
A 5 11
B 10 7
C 15 4
D 20 2
E 25 1

Calculate Sue's marginal rate of substitution of soft drinks for bottled water at each rate of consumption of water (or soft drinks). Relate the marginal rate of substitution to marginal utility.

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