Benoit's preferences are given by the utility function U(x,y)= 10x + 5y. He consumes 10 units of good x and 9 units of good y. If he consumes only one unit of x, how many units of y must he consume in order to be as well off as before?
A)10
B)27
C)18
D)30

Question

Quizplus · Accepted Answer

To keep Benoit's utility the same after reducing his consumption of good x from 10 units to 1 unit, we first calculate his initial utility: U(10,9) = 10(10) + 5(9) = 100 + 45 = 145. Then, we solve for the amount of good y (let's call it y*) he needs to consume to maintain this utility level with only 1 unit of x: 145 = 10(1) + 5y*. Solving for y* gives us y* = (145 - 10) / 5 = 135 / 5 = 27.

Benoit's Preferences Are Given by the Utility Function U(x,y)= 10x