Sir kindly help me with this ... In a 2 commodity framework the marginal rate of substitution is everywhere equal to 2. The prices of the two goods are equal. Draw a diagram to identify the utility maximizing equilibrium.
Bhumika Sharma if MRS = 2 and px=py, then price ratio =1, hence indifference curves are steeper than the BC and the solution involves the consumer exhausting their budget on good X. They’ll buy x=M/px where M is income and px is the price if good X. It’s the All X picture.
Sir, I have another question related to production function. Though I have done it but I want to get it checked. Is there any way where I can send you the picture of the solution. I'll be really grateful to you. Regards
The coefficients are the marginal utilities--these could be recovered empirically by surveys, though that'll be inaccurate. The empirical exercise would probably look like backing out the MRS from looking at how much the relative prices need to change before someone goes from buying only one good to buying only one of the other, and from that you could place bounds on what the MRS could be...
![(M3E9) [Microeconomics] Utility Maximization Problem with Linear Utilities (Perfect Substitutes)](/img/1.gif)
you are such a cheerful and awesome teacher!!!! Finding your lectures has been a blessing.
Legends say hes still trying to edit the 3 to 4
This is great! I've finally understood it. Thank you sir!
hocam gerçekten inanılmazsınız teşşekürler her şey için iyi ki varsınız
note: its turkish if you wanna translate.
nice video, appreciate it
Awesome, great to hear!
Sir kindly help me with this ...
In a 2 commodity framework the marginal rate of substitution is everywhere equal to 2. The prices of the two goods are equal. Draw a diagram to identify the utility maximizing equilibrium.
Bhumika Sharma if MRS = 2 and px=py, then price ratio =1, hence indifference curves are steeper than the BC and the solution involves the consumer exhausting their budget on good X. They’ll buy x=M/px where M is income and px is the price if good X. It’s the All X picture.
Sir, since it is mentioned MRS is 2 everywhere, does that means MRS is constant? So my IC curve will be downward sloping straight line ?
Bhumika Sharma yes indeed, otherwise the MRS would change with the composition of the bundle. If MRS is constant we’ll have straight lines.
@@BenZamzow thank you so much sir. Regards
Sir, I have another question related to production function. Though I have done it but I want to get it checked. Is there any way where I can send you the picture of the solution. I'll be really grateful to you. Regards
If you think you are the laziest, then meet with me:) thanks for the videos.
That's awesome, I suppose the key is being selective with one's energies and focus!
Hi Ben Zamzow, how r you? Can you help me? How do I find the coefficient a and b? Thinking of a practical case.. ax+by perfect substitution
The coefficients are the marginal utilities--these could be recovered empirically by surveys, though that'll be inaccurate. The empirical exercise would probably look like backing out the MRS from looking at how much the relative prices need to change before someone goes from buying only one good to buying only one of the other, and from that you could place bounds on what the MRS could be...
To solve B, you gotta say px=4 again, because px=4 only included A xD