Relate the concept of marginal rate of substitution back to the idea of willingness to pay and economic return. In particular... If my |MRS2 for1|> ERS2 for 1| can I receive additional economic return by reallocating by budget away from one commodity and towards another? If so, how? Why? Please include a diagram in your answer.

Relate the concept of marginal rate of substitution back to the idea of willingness to pay and economic return. In particular... If my |MRS2 for1|> ERS2 for 1| can I receive additional economic return by reallocating by budget away from one commodity and towards another? If so, how? Why? Please include a diagram in your answer.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter20: Consumer Choice And Elasticity

Section: Chapter Questions

Problem 3CQ: Recent research confirms that the demand for cigarettes is not only inelastic, but it also indicates...

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I understand the substitution effect, but I really need to understand the Income effect. Please explain that and thank you in advanced ?