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Q. It is common for supermarkets to carry both generic (store-label) also brand-name (producer-label) varieties of sugar also other products. Many consumers view these products as perfect substitutes, meaning which consumers are always willing to substitute a constant proportion of the store brand for the producer brand. Consider a consumer who is willing to substitute 3 pounds of a generic store-brand sugar for 2 pounds of a brand-name sugar. Do these preferences exhibit a diminishing marginal rate of substitution between store-brand also producer-brand sugar? Suppose which this consumer has $10 of income to spend on sugar also the price of store-brand sugar is $1 per pound also the price of producer-brand sugar is $2 per pound. Describe how much of every type of sugar will be purchased? Describe how would your answer change if the price of store-brand sugar was $2 per pound also the price of producer-brand sugar was $1 per pound?
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