Suppose Charley only purchases boardgames (B) and haircuts (H) with his income
If the price of boardgames increases by 100% while the price of haircuts increases by 300%, how will the MRT change (consider the budget constraint drawn on a graph with boardgames on the horizontal axis)?
Before the price change, the MRT = -pB/pH. After the price change, the
MRT' = -(2)pB/(4)pH = MRT/2. The MRT is half.
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