Thread: mrs

MRS=y/2x
price of x is $1
price of y is $3
income is $90
how much of each good should be consumed in order to maximize utility

Utility is maximised when $\displaystyle MRS_{y,x}=\frac{P_x}{P_y}$
so $\displaystyle \frac{y}{2x}=\frac{1}{3} \to y=\frac{2}{3}x$ Substituting this into the B.C which is
$\displaystyle M=P_x x+P_y Y$,
$\displaystyle 90=X+3Y=X+2X \to X=\frac{90}{3}=30$

So Y can be calculated using $\displaystyle X=30$ and substituting into the B.C, or solving MRS equal to the price ratio for X.

great respons on the issue. there are more math problmes that require variable results!