A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 21 The unit price of X is $2 and the unit price of Y is $7 The utility maximizing rule suggests that this consumer should decrease consumption of product X and increase consumption of product Y decrease consumption of product X and decrease consumption of product Y decrease consumption of product Y and increase consumption of product X stick with the current consumption mix because it yields maximum utility

The Answer is in the image, click to view ...

Question: A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 10 and the marginal utility of Y is 21. The unit price of X is $2 and the unit price of Y is $7. The utility-maximizing rule suggests that this consumer should?

decrease consumption of product X and increase consumption of product Y.
decrease consumption of product X and decrease consumption of product Y.
decrease consumption of product Y and increase consumption of product X.
stick with the current consumption mix because it yields maximum utility.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 40 utils and the marginal utility of the...

A consumer currently spends a given budget on two goods, X and Y, in such quantities that the marginal utility of X is 6 and the marginal utility of Y is 12. The unit price of X is $2 and the unit...

A consumer currently spends a given budget on two goods, X and Y , in such quantities that the marginal utility of X is 1 2 and the marginal utility of Y is 8 . The unit price of X is $ 3 and the...

6 Marginal Rate of Substitution Recall that the Marginal Rate of Substitution for two goods x and y is minus the marginal utility of good x, divided by the marginal utility of good y: ammo) _ 6:2:...

Pam has the utility function U(X,Y)=X^(1/3)*Y(2/3) , where X is the quantity of apples consumed, and Y is the quantity is the quantity of oranges consumed. Let income be I=90. a) suppose the price of...

E x pl ainan s w ers f or t h ese q u es t i o n s : Answer all: Problem set 1: Preferences and Utility Exercise 1: Suppose the utility function for two goods, X and Y, has the Cobb-Douglas form...

1. Optimal Bundles Consider a market with two goods, x and z that has the following utility function U = x 2/5 z 3/5 The price of good x is px = 6 and the price of good z is pz = 2 and the consumer...

Maya spends her $50 budget on two goods, cans of tuna and bottles of ginger ale. Initially, the marginal utility per dollar she spends on tuna is equal to the marginal utility per dollar she spends...

1. (20 points) Suppose a consumer views two goods, X and Y, as perfect complements. Her utility function is given by U = MIN [2X, Y]. Sketch the graph of the consumers indifference curve that goes...

I need help with this question please The PPC below shows how many airplanes and pizzas Country A and Country B can produce with a certain number of workers. 6 Airplanes B Pizzas (millions) | The...

Borland, Inc., has a profit margin of 6.45 percent on sales of $22,400,000. Assume the firm has debt of $8,600,000 and total assets of $15,200,000. What is the firm's ROA? (Do not round intermediate...

A cylindrical tank with hemispherical heads is constructed of steel sections that are welded circumferentially (see figure). The tank diameter is 1.25 m, the wall thickness is 22 mm, and the internal...

Required information A not - for - profit hospital would present all of the following financial statements except a Multiple Choice Balance sheet or statement of financial position. Statement of...

Two parallel members ABC and DEF are placed between two walls and are connected by link BE. Neglecting friction between the members and the walls, determine the range of values of the distance a for...

Determine the force in each of the members located to the left of member FG for the scissor roof truss shown. State whether each member is in tension or compression. 05 kip I kip 3 it 3 ft 3 it 3 ft...

The horizontal platform ABCD weighs 60 lb and supports a 240-lb load at its center. The platform is normally held in position by hinges at A and B and by braces CE and DE. If brace DE is removed,...

An airfoil at an angle of attack α, as in Fig P3.150, provides lift by a Bernoulli effect, because the lower surface slows the flow (high pressure) and the upper surface speeds up the flow (low...

The trial balance of Pollard Company at the end of its fiscal year, August 31, 2012, includes these accounts: Beginning Inventory $18,700; Purchases $154,000; Sales Revenue $190,000; Freight-in...

Which leader is most likely to have a high - performing team? Zane, who lets the employees learn on their own and rarely interferes Josie, who shares all positive and negative feedback Alex, who only...

4. What means will you use to achieve these values?

5. List three of what you would call your core values. For each of these core values, answer the following questions. a. What is the purpose of this value in your life? b. How does this value affect...

3. What values would you say are your core values?