Over the Past Decade,medical Costs Have Increased More Rapidly Than

question 106

Essay

Over the past decade,medical costs have increased more rapidly than other prices.In order to illustrate how rising medical costs have affected consumer alternatives,let X represent the quantity of medical services,and let Y represent the quantity of other goods.Furthermore,let income (M)be measured in hundreds of dollars,the price of medical services and other goods in terms of dollars per minute,with M = 100,P_x = 4,and P_y = 5.
a.Graph the budget line,and determine the market rate of substitution.
b.Illustrate the budget set.
c.Show in your graph what happens to the budget constraint if P_x increases to $10.
d.What is the meaning of the slope of the two budget constraints?

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