Jacob consumes 2 goods coffee and cigarettes 3 cigarettes, Ask an Expert

Economics

Jacob consumes 2 goods, coffee and cigarettes, 3 cigarettes can be traded for 1 cup of coffee in a free market, or 1 cup of coffee can be traded for 3 cigarettes, Jacob initially has 12 cigarettes and 5 cups of coffee.

1. Find an equation that gives every bundle of cigarettes and coffee that Jacob could trade for.

2. Jacob has an MRS = -5 when he is holding his inital bundle (cigs,coffee)=(12,5). Given the rate of exchange, would Jacob trade cigarettes for coffee, or coffee for cigarettes? Please explain a little

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91423747

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