If a consumer views the two goods they consume as perfect substitutes, the optimal bundle will be a corner solution. Explain
What will be an ideal response?
Perfect substitutes are goods for which at any point you will trade one good in the same proportion for the other. The specific utility function is U(x,y) = ax + by, and the ICs are linear throughout.
A corner solution is when the optimal bundle is all of one good and none of the other (i.e. the solution is at the intercept of the BC and one of the axes).
True, since the MRS is constant for p.s.'s, the optimal bundle will occur at a corner
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