ADVANCED ANALYSIS Let: MUA = z = 12 - 1x MUB = z = 15 - 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $9 to spend on A and B–that is, x+ y= 9. Instructions: Enter your answers as a whole number. a. How is the $9 best allocated between A and B? 24 on A and $ on B b. How much utility will the marginal dollar yield? utils
ADVANCED ANALYSIS Let: MUA = z = 12 - 1x MUB = z = 15 - 2y, where z is marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B. Assume that the consumer has $9 to spend on A and B–that is, x+ y= 9. Instructions: Enter your answers as a whole number. a. How is the $9 best allocated between A and B? 24 on A and $ on B b. How much utility will the marginal dollar yield? utils
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Hello. Since you have posted multiple questions and not specified which question needs to be solved, we will solve the first question for you. If you want any other specific question to be solved, then please resubmit only that question or specify that part only.
According to the question, the marginal utility for the two different goods is given. To maximize the total utility, we have the condition
MUa/Pa = MUb/Pb
So,
MUa = 12- x
MUb = 15 – 2y
And x + y = 9
Here Pa = 1, Pb = 1
Applying above condition
12 –x /1 = 15 -2y/1
12 – x = 15 -2y
-x + 2y = 3
Solving this equation and the budget line will give
-x + 2y = 3
x + y = 9
3y = 12
Y = 4
X = 5
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