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Homework answers / question archive / Suppose that a consumer is consuming banana and hazelnut
Suppose that a consumer is consuming banana and hazelnut. Price of banana is 5TL, while the price of hazelnut is 10 TL. The consumer's income is 100 TL. Marginal rate of subsitution between banana and hazelnut is given as follows: MU QF MRSFM MU OM a) Write the equation of the budget line. b) Calculate the slope of the budget line. c) Obtain the equilibrium quantity of banana and hazelnut for the consumer. Show equilibrium point on the graph. d) Suppose that the income of the household doubles. If the hazelnut is an inferior good for the consumer, what will be the possible equilibrium point? Show on the graph.
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