Question

A consumer has ​$140 in monthly income to be spent on two goods Z and B. The price of good Z ​(Pz​) is ​$6.00. The Marginal Rate of Transformation​ (MRT) is equal to minus2. That is 2 units of good B can be traded for 1 unit of good Z. What is the price of good​ B? ​$ nothing ​(round your answer to the nearest ​penny). How many units of good B can be purchased if all income is used for that​ good? nothing units ​(round your answer to two decimal ​places).

Answer 1

Answer:

3 and 46.67 units

Explanation:

The formula and the computations are shown below:

The price of good B is

= {The price of good Z (Pz)} ÷ {Marginal rate of transformation}

= {$6} ÷ {2}

= 3

Now the number of units to be purchased for all income used is

= (Monthly income spent on two goods) ÷ (price of good B)

= ($140) ÷ (3)

= 46.67 units

By applying the above formula we can find out the price of good B and the number of units purchased