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Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL = 24 and MUE = 20. The price of eye shadow is $5, and the price of lipstick is $4. What should Valerie do? To get to consumer equilibrium, should she buy more lipstick or more eye shadow? Use your knowledge of consumer equilibrium and utility maximization and the law of demand to describe why she should buy more lipstick or more eye shadow. Show your calculations and then describe your answer.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M968453

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