00:01
Suppose that boston's consumers pay twice as much for avocados as for tangerines, whereas san diego consumers pay half as much for avocados as for tangerines.
00:11
Assuming the consumers maximize their utility, which say consumers have a higher marginal rate of substitution of avocados for tangerines.
00:21
So we're going to base our answer off of the slope of the consumer's indifference curve.
00:28
So here we have the indifference curve.
00:33
On the y -axis, we have avocados, and then tangerines will be on the x -axis.
00:51
So, pa is going to be the price of avocados, while pt is going to be the price of tangerines.
01:00
The solution to the consumer choice problem at the affordable bundle that maximizes utility is the slope of the consumer's indifference curve.
01:12
So the slope of this curve is equal to pa over pt.
01:15
This makes sense because slope is change in y or change in x.
01:27
So we have price of good y over price of good x or avocados over tangerines...