http://www.carpoolbg.com/list-cars-by-gas-mileage/
Marginal Rate of Substitution?
Brenda wants to buy a new car and has a budget of $25,000. She has just found a
magazine that assigns each car an index for styling and an index for gas mileage.
Each index runs from 1-10, with 10 representing either the most styling or the best
gas mileage. While looking at the list of cars, Brenda observes that on average, as the style index rises by one unit, the price of the car increases by $5,000. She also
observes that as the gas mileage index rises by one unit, the price of the car increases
by $2,500.
Suppose that Brenda’s marginal rate of substitution (of gas mileage for styling) was equal to S/ 4G . What value of each index would she like to have in her car?
MRS=S/4G S=Styling G=Gas mileage
Total price= i x 5000 + i` x 2500
Price= i 5000
Price`= i`2500
MRS from price value=P/P`
S/4G=0.25 (S/G). Every one unit of G, she´ll get 0.25 of S
4G implies 1S.
i=4 i`=1 P=4 x 5000 + 1×2500=22500 $
Ford Focus Video Review – Kelley Blue Book
