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Math Help - mrs

  1. #1
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    Mar 2009
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    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
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  2. #2
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    Mar 2009
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    Utility is maximised when MRS_{y,x}=\frac{P_x}{P_y}
    so \frac{y}{2x}=\frac{1}{3} \to y=\frac{2}{3}x Substituting this into the B.C which is
    M=P_x x+P_y Y,
    90=X+3Y=X+2X \to X=\frac{90}{3}=30

    So Y can be calculated using X=30 and substituting into the B.C, or solving MRS equal to the price ratio for X.
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  3. #3
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    Feb 2010
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    great respons on the issue. there are more math problmes that require variable results!
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