Find an equation that gives every bundle of cigarettes

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Reference no: EM13860235

Question (1)Iggy only consumes two goods: coffee and cigarettes. Three cigarettes can be traded for one cup of coffee in a free market, or one cup coffee can be traded for three cigarettes. Iggy initially has 12 cigarettes and 5 cups of coffees.

a. Find an equation that gives every bundle of cigarettes and coffee that Iggy could trade for.

b. Iggy has a MRS = -5 when he is holding his initial bundles (cigs, coffee)=(12,5). Given the rate of exchange, would Iggy trade cigarettes for coffee, or coffee for cigarettes?

Question (2)Consider a consumer who can purchase only two goods x and y. If this consumer can, given her income, just afford two bundles(x,y)=(12,6) and (x,y)=(9,8). If Py=3, find the equation that describes her budget line.

Reference no: EM13860235

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