Suppose that 25 units of X and 16 units of Y give a consumer the same satisfaction as 15 units of X and 18 units of Y.Then
A)the consumer can exchange five units of X for one unit of Y and keep utility unchanged.
B)the consumer can exchange one unit of X for 1/5 unit of Y and keep utility unchanged.
C)the market rate of exchange of X for Y is 1/5.
D)both a and b
E)all of the above

Question

Quizplus · Accepted Answer

Since the question states that 25 units of X and 16 units of Y give the same satisfaction as 15 units of X and 18 units of Y, it means that one unit of X is worth (18-16)/(25-15) = 1/5 units of Y. Therefore, both options A and B are correct. Answer choice C is incorrect because it only gives the market rate of exchange without taking into account the consumer's utility.

Suppose That 25 Units of X and 16 Units of Y