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6. assume that an individual is rational consumer who consume anly two goods of banana (b) and nuts (n) assum that his marginal hate of

Question

6. Assume that an individual is rational consumer Who consume anly two goods of Banana (B) and nuts (N) Assum that his marginal hate of a substit tution banana far nuts is given by the Following Formula [ m_(R_(1) s)=(m_(u a))/(m_(B))=(B)/(N) ( That siply equal to the ) ] ratio of the aumber of Banana consumed for the Number af nuts consumes Assume that his income in Birr 200 the price or nuts is Birr 5 and price or bananas is Birr lo what a vantities of Bananas and avits will be consured.

Solution

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4.6 (392 Votos)
Luiza Avançado · Tutor por 1 anos

Resposta

To determine the quantities of bananas and nuts that a rational consumer will consume, we need to consider the consumer's budget constraint and their marginal rate of substitution (MRS).### Given:- **Price of bananas ( )**: Birr 10- **Price of nuts ( )**: Birr 5- **Income**: Birr - **Marginal Rate of Substitution (MRS)**: ### Budget Constraint:The consumer's budget constraint can be expressed as: ### Optimal Consumption:A rational consumer maximizes utility by consuming goods such that the MRS equals the price ratio. Therefore, the condition for optimal consumption is: Substituting the given MRS and prices: This implies: ### Solving the System of Equations:Now, substitute into the budget constraint: Using : ### Conclusion:The quantities of bananas and nuts consumed are:- **Bananas ( )**: - **Nuts ( )**: These expressions give the quantities in terms of income . To find specific quantities, you would need to know the exact value of .