Chapter 20: Q. 17 (page 453)

At a consumer optimum involving goods $X$ and $Y$ , the price of good $X$ is $$ 3$ per unit, and the price of good $Y$ is $9$ per unit. How much greater or smaller is the marginal utility of good $Y$ than the marginal utility of good $X$ ?

Short Answer

Expert verified

As a result, the marginal utility of good $Y$ is three times that of good $X$ .

Step by step solution

Introduction

A consumer has many needs but only so much money to fulfil them. He wants to make the most of his limited resources in order to maximise his happiness. The utility theory explains how consumers pick between the various consumption options available to them.

Explanation

Any change in the relative costs of one or more items will cause the consumer to re-evaluate his purchases, swapping one good for the other until the marginal utility of the last dollar spent on each commodity is equal once more.

We know,

$P_{X}$ = $$ 3$ per unit and $P_{Y}$ = $$ 9$ per unit

By usingrole="math" localid="1652799448296" $\frac{M U_{x}}{P_{x}} = \frac{M U_{y}}{P_{y}}$

Substituting the values,

$= \frac{M U_{x}}{3} = \frac{M U_{y}}{9}$

$= \frac{9}{3} = \frac{M U_{y}}{M U_{x}}$

$M U_{y} = 3 \times M U_{x}$

The marginal utility of good Y is three times that of good X.

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At a consumer optimum involving goods $X$ and $Y$ , the price of good $X$ is $$ 3$ per unit, and the price of good $Y$ is $9$ per unit. How much greater or smaller is the marginal utility of good $Y$ than the marginal utility of good $X$ ?

Short Answer

Step by step solution

Introduction

Explanation

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Most popular questions from this chapter

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At a consumer optimum involving goods Xand Y, the price of good Xis $3per unit, and the price of good Yis 9 per unit. How much greater or smaller is the marginal utility of good Ythan the marginal utility of good X?

Short Answer

Step by step solution

Introduction

Explanation

One App. One Place for Learning.

Most popular questions from this chapter

Study anywhere. Anytime. Across all devices.

At a consumer optimum involving goods $X$ and $Y$ , the price of good $X$ is $$ 3$ per unit, and the price of good $Y$ is $9$ per unit. How much greater or smaller is the marginal utility of good $Y$ than the marginal utility of good $X$ ?