Question: 3. (a) Suppose a consumer consumes two commodities X and Y. To be on the same utility level, the consumer is always willing to give

3. (a) Suppose a consumer consumes two commodities X and Y. To be on the same utility level, the consumer is always willing to give up exactly 3 units of Y for an additional unit of X. Price of X is 40 and that of Y is 20. The income of the consumer is 400. What percentage of income will the consumer spend on commodity Y?

(b) The utility levels and the quantity of X and Y consumed by a consumer are given below. The price of X is 30 and the price of Y is 12. Is the consumer maximizing her utility? Give reasons for your answer.

Utility Y X (units) (Units) (Units)	Utility Y X (units) (Units) (Units)
280 5 10	280 5 10
330 5 11	300 6 10

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3a In this case the consumer is willing to exactly give up 3 units of good X to get one additional unit of good Y implying that the marginal rate of s... View full answer

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