Question 67
HardOriginal 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 ₹26, what is the marginal utility of a rupee at the equilibrium?
Show the answer and explanation
CorrectNot quiteAnswer A
Correct answer: A
Explanation
₹26 buys 4 X and 5 Y: 4 × ₹4 + 5 × ₹2 = ₹26.
There MUₓ ÷ Pₓ = 8 ÷ 4 = 2 and MUᵧ ÷ Pᵧ = 4 ÷ 2 = 2, so MUₘ = 2 utils.
Worth noting
8 is the MU of the 4th unit of X in utils, before dividing by its price.
- Concept
- Marginal utility of money at equilibrium
- Typical timeTypical
- 100 s
- Your timeYours
- —
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