Question 58
MediumOriginal questionThe price of X is ₹4 and the price of Y is ₹2. A consumer's marginal utilities are:
| Units | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| MU of X (utils) | 20 | 16 | 12 | 8 | 4 |
| MU of Y (utils) | 12 | 10 | 8 | 6 | 4 |
With an income of ₹14, what is the equilibrium combination?
Show the answer and explanation
CorrectNot quiteAnswer A
Correct answer: A
Explanation
At 2 X the ratio is 16/4 = 4; at 3 Y it is 8/2 = 4. The ratios are equal.
Spending = 2 × ₹4 + 3 × ₹2 = ₹14, the whole income.
- Concept
- Equilibrium at a lower income
- Typical timeTypical
- 70 s
- Your timeYours
- —
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