The consumer has bought 1 unit of X and…

The consumer has bought 1 unit of X and has income left for one more unit of either good.

Question 59

MediumOriginal question

The 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

The consumer has bought 1 unit of X and has income left for one more unit of either good. Which should it be?

The 2nd unit of X, which gives 16 utils against 12 for YCorrect answerYour answerEither, because both give the same utilityCorrect answerYour answerThe 1st unit of Y, which gives 6 utils per rupee against 4 for the 2nd unit of XCorrect answerYour answerNeither, because MU is fallingCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

Compare utility per rupee, not utility: the 2nd X gives 16 ÷ 4 = 4; the 1st Y gives 12 ÷ 2 = 6.
Each rupee buys more satisfaction in Y, so Y comes first.

Worth noting

Judging by 16 against 12 ignores that X costs twice as much.

Concept: Spending by utility per rupee
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsEquilibrium with two goods

Practise this chapter →

Ten questions from Utility & Consumer's Equilibrium, at your own pace.

Practise this chapter →

Ten questions from Utility & Consumer's Equilibrium, at your own pace.

The consumer has bought 1 unit of X and has income left for one more unit of either good.

Question 59

Explanation