Question

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18.

Units of X	Total Utility, X	Units of Y	Total Utility, Y
1	20	1	16
2	36	2	30
3	48	3	42
4	56	4	52
5	62	5	60
6	66	6	64

What quantities of X and Y should be purchased to maximize utility?

A. 2 of X, 5 of Y

B. 4 of X, 5 of Y

C. 2 of X, 1 of Y

D. 2 of X, 6 of Y

Answer 1

Option A

Here we need to find the marginal utility per price as in the below table. So, based on the mazimum value of MU/P, we need to select quantities.

Hence 5 units of Y and 2 units of X would yield the maximum utility

Maximum utility = 2*4+5*2 = 8+10 = 18

Units of X	Total Utility, X	MUX	MUX/P	Units of Y	Total Utility, Y	MUY	MUY/P
1	20	20	5	1	16	16	8
2	36	16	4	2	30	14	7
3	48	12	3	3	42	12	6
4	56	8	2	4	52	10	5
5	62	6	1.5	5	60	8	4
6	66	4	1	6	64	4	2