Calculate marginal rate of substitution in good x2

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Reference no: EM13207006

Suppose a person's utility function is of the form u(x1, x2) = x1 + ?x2. The budget constraint for this person will be given by B = px1 x1 + px2 x2

1. Find the marginal utility of good x1
2. Find the marginal utility of good x2
3. Calculate the Marginal Rate of Substitution between good x2 and good x1: MRSx2,x1 = (du(·)/dx2)/(du(·)/dx1)
4. Equate this marginal rate of substitution to the ratio of prices : (Px2)/(Px1)

Reference no: EM13207006

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Calculate marginal rate of substitution in good x2 : 2. Find the marginal utility of good x2 3. Calculate the Marginal Rate of Substitution between good x2 and good x1: MRSx2,x1 = (du(·)/dx2)/(du(·)/dx1) 4. Equate this marginal rate of substitution to the ratio of prices : (Px2)/(Px1)

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