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natulia
2 months ago
6

Imagine that two goods are available to you: servants (X) and robots (Y). You like servants three times as much as robots. If yo

ur domestic help budget is $4,000 per month, the price (wage) of servants is $1500 per person per month, and the price (rent) of robots is $400 per unit per month, what is the value of the MktRS (market rate of substitution)
Business
1 answer:
Scilla [3.8K]2 months ago
4 0

Response: 3

Clarification:

Marginal rate of substitution indicates how much of one good can be exchanged for another based on prevailing market prices.

As your preference shows you favor servants three times over robots, it suggests that the satisfaction derived from one servant is equivalent to that from three robots.

Thus, the utility function is defined as:

U = 3X + Y

Accordingly, the marginal rate of substitution can be calculated as:

= MUX/MUY

= 3

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