Question

Answer the question on the basis of the following two schedules, which show the amounts of additional satisfaction that a consumer would get from different quantities of products J and K.

Units of J	MUj	Units of K	MUk
1	48	1	28
2	32	2	24
3	24	3	20
4	20	4	12
5	16	5	10
6	12	6	8
7	8	7	6

If the consumer has money income of $64 and the prices of J and K are $8 and $4 respectively, the consumer will maximize her utility by purchasing

A. 5 units of J and 5 units of K

B. 4 units of J and 5 units of K

C. 1 unit of J and 2 units of K

D. 5 units of J and 6 units of K

Answer 1

Units of J	MUj	TUj	Units of K	Muk	Tuk
1	48	48	1	28	28
2	32	80	2	24	52
3	24	104	3	20	72
4	20	124	4	12	84
5	16	140	5	10	94
6	12	152	6	8	102
7	8	160	7	6	108

	Feasibility	Utility of J	Utility of K	Total utility achieved
5 units of J and 5 units of k	=(5*8)+(5*4)	140	94	=SUM(J3:K3)
4 units of J and 5 units of K	=(4*8)+(5*4)	124	94	=SUM(J4:K4)
1unit of J and 2 units of K	=(1*8)+(2*4)	48	52	=SUM(J5:K5)
5 units of J and 6 units of k	=(5*8)+(6*4)	140	102	=SUM(J6:K6)

Utility is maximum while purchasing 5 units of J and 6 units of K.

Answer: D. 5 units of J and 6 units of K