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Alexandra is maximizing her utility over goods x and y subject to her budget constraint. Her preferences are smooth (maximizers are always interior). At her optimal consumption bundle, her MRS of goof
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Alexandra is maximizing her utility over goods x and y subject to her budget constraint. Her preferences are smooth (maximizers are always interior). At her optimal consumption bundle, her MRS of goof y for good x is equal to 1. The price of good x is $4. What is the price of good y?

User Szmoore
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6 votes

Answer: $4

Explanation: The optimization ratio between good x and y is the same .

In other words .Alexandra is maximizing her utility over goods x and y subject to her budget constraint at constant ratio . This is from the fact that At her optimal consumption bundle, her MRS of goof y for good x is equal to 1.

User Anirudh Jayakumar
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