Question

QUESTION 6 Total Utility from Y 85 130 160 185 200 210 215 Total Utility from X 24 Quan 56 74 80 84 Refer to the table above. Given that the price of good X is $2 per unit, the price of good Y is $5 per unit, and that the consumer spends a total of $44 on both goods, what is the total utility associated with the utility-maximizing combination? A 280 B. 294 C. 172 D.We don't have enough information to determine total utility E. 251

Answer 1

MU = Marginal utility = Tu^n_x - Tu^n-1_x Utility maximization condition = > mu_x/mu_y = p_x/p_y p_x/p_y = 2/5 mu_x/mu_y = 2/5 when mu_x = 10 & mu_y = 25 mu_x/mu_y = 10/25 = 2/5 therefore X* = y* = 4 Total utility associated with 4 units of quantity = 66 + 185 = 251 therefore E = 251 is correct