Suppose a Consumer Consumes Two Goods, X and Y

question 434

Multiple Choice

Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the

• A)marginal rate of substitution.
• B)rate at which the consumer will give up X to gain Y while maintaining the same level of utility.
• C)slope of the budget constraint.
• D)All of the above are correct.

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Definitions:

Annuity

An economic tool that delivers a stable flow of income to an individual, commonly employed in retirement planning strategies.

Discount Rate

The interest rate used to discount future cash flows to their present values, often reflecting the cost of capital or risk.

Perpetuity

A type of annuity that pays a fixed amount of money to an individual indefinitely, without a termination date.

Interest Rate

The percentage of principal charged by the lender for the use of its money or the rate earned on savings or investments.