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What is the market rate of substitution between goods

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A consumer has $300 to spend on goods X and Y. The market prices of these two goods are Px = $15 and Py = $5.

a. What is the market rate of substitution between goods X and Y?

b. Illustrate the consumer’s opportunity set in a carefully labeled diagram.

c. Show how the consumer’s opportunity set changes if income increases by $300. How does the $300 increase in income alter the market rate of substitution between goods X and Y?

Reference no: EM13315793

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