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Lynna [10]
3 years ago
15

Alex has allocated his income in such a way that the marginal utility of the last unit of product X he consumes is 40 utils and

that of the last unit of Y is 16 utils. If the unit price of X is $5, then the price of Y must be ________.
A. $1 per unit.
B. $2 per unit.
C. $3 per unit.
D. $4 per unit.
Business
1 answer:
ikadub [295]3 years ago
6 0

Answer:

The price of product Y is B) $2 per unit.

Explanation:

Marginal utility is the satisfaction derived from the consumption of an additional unit of a product or commodity. When calculating for the utility maximization, one has to consider four things;- The products or commodities in question as well their different prices. The utility maximization is calculated using the formula; MU(X) ÷ P(X) = MU(Y) ÷ P(Y). MU(X) and P(X) here represents marginal utility of product X and price of X  respectively while MU(Y) and P(Y) represents marginal utility of Y and price of product Y respectively. This is thus solved without the price of Y. So, P(Y) is an unknown assumed as A.

Therefore, MU(X) ÷ P(X) = MU(Y) ÷ P(Y) is replaced with figures; 40 utils ÷ $5 = 16 utils ÷ $A

Using cross multiplication, we have 40A = 80; A = 80 ÷ 40 = 2

Therefore. $2 per unit is the price of product Y

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a. Kantianism

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<h3>What is marginal utility?</h3>

The extra satisfaction which a consumer receives from possessing one more unit of an item or service is known as marginal utility.

The concept of marginal utility is helps in describing how customers make decisions to get the most out of their limited budgets. In general, until the marginal utility exceeds the marginal cost, consumers will keep buying more of a good.

There are three types of Marginal utility:

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brainly.com/question/15050855

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6 0
1 year ago
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