A consumer has a budget of $200 to spend on bowling (b) and tutoring sessions (t

ID: 1190890 • Letter: A

Question

A consumer has a budget of $200 to spend on bowling (b) and tutoring sessions (t). Assume that each game of bowling costs $16 and each tutoring session costs $20.

The consumer derives utility from tutoring sessions and bowling according to the utility function U(b, t). The consumers marginal utility from each game of bowling is MUb=t and the marginal utility of each tutoring session is MUt=b+1. What is the consumers marginal rate of substitution?

Hello. The b in the MUb is a very small b on my sheet, but I can't write it out that way here. Thank you. If you can provide any information on how you get the answer, that would be great.

Explanation / Answer

The marginal rate of substitution is the ration os price of the two commodities being consumed.

MRSbt = MUb/MUt = Pb/Pt

As per the information given in the question

MRSbt = 16/20 = 4/5 or 0.8

For 0.8 Amount of tutoring lessons the consumer is willing to exchange 1.

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A consumer has a budget of $200 to spend on bowling (b) and tutoring sessions (t

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