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What is the equation of his budget line? 

Sketch the budget line and two possible indifference curves that Herbert might have (use shelter on the horizontal axis and food on the vertical axis). One indifference curve should show Herbert spending his entire budget but consuming too much shelter. Label that point on the graph A. The other indifference curve should show Herbert choosing the best feasible bundle. Label the optimal point B.

What is Herbert's marginal rate of substitution between food and shelter when he is consuming the best feasible market basket?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M9741413

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