Eric and Chris run a non-regulated natural monopoly producing electricity for a small town. The barrier most likely preventing o
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Mr. Rational is a utility maximizer, he should buy less of X and more of Y.
<h3>What do you mean by marginal utility?</h3>
- In economics, marginal utility refers to the additional pleasure or benefit (utility) a buyer receives by purchasing an additional unit of a good or service.
- The general rule in economics is that marginal utility equals total utility change divided by change in quantity of goods.
- The equation looks like this Total utility difference divided by amount of commodities difference equals marginal utility.
- Find the first event's overall utility.
According to the question:
The amount that Mr. Rational is going to spend = $27.
Quantity of good X = 5 units.
Price of good X (Px) = $3 per unit.
Marginal utility of 5th unit of X (MUx) = 30.
Quantity of good Y = 6 units.
Price of good Y (Py) = $2 per unit.
Marginal utility of 6th unit of Y (MUy) = 18.
Now find
Now
Since the
So, good x will be substituted for y in order to reach the consumer equilibrium.
Learn more about marginal utility here:
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