Consumer Theory and preferences: a microeconomic application. by Devon Swan Mael-yann Le Capitaine. Consumer Theory.
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Mael-yann Le Capitaine
Px= Price/unit of X
Py= Price/unit of Y
MU= Marginal Utility
ApplicationIf Devon and Mael pay the same prices (per year) for their leisure, will their marginal rates of substitution of Alc.Bev or Travelling be the same or different?
- Price of Alc.Bev. = Pa = $20/unit
- Price of Trav. = Pt = $500/unit
Units of Alc. Bev
Budget / Pa = $2000/$20 = 100
Mael Indifference Curve
Devon Indifference Curve
Point A and B are the best consumer possibilities for Mael and Devon.
Units of Trav.
Budget / Pt = $2000/$500= 4