Essay
Nicole's income is $1,000 per month.She spends all of it on shoes (S)and books (B).Shoes cost $50 and books cost $25.Her marginal rate of substitution for shoes with books is MRSSB = 2B/3S.Illustrate her utility-maximizing combination of shoes and books and draw her price-consumption curve if the price of books rises to $30.
B. M = PS (2/3)(PB/PS)B + PBB, which implies B = (3/5) (M/PB ) =
B. When PB = $30, B = 20. The new utility-maximizing combination of books and shoes is represented by point b in Figure 5.13. Connecting points a and b gives the price-consumption curve.
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