Molly received utility from consuming apples (X) and shoes (Y), as given by the utility function TU=f(X,Y) = XY
In addition, the price of apples (X) is $2 per unit and the price of clothing (Y) is $10 per unit. Molly has $50 to spend on both goods.
Suppose Molly is consuming at a bundle with more apples (X) and less shoes (Y) than her utiltiy maximizing bundle. Would her marginal rate of substitution of apples (X) for shoes (Y) be greater or less than her marginal rate of substitution at equilibrium? Explain.