Doreen has preferences represented by the utility function U(x, y) = 10x + 5y. She consumes 10 units of good x and 9 units of good y. If her consumption of good x is lowered to 1, how many units of y must she have in order to be exactly as well off as before?
A) 30
B) 30.
C) 27
D) 18
E) None of the above.

Question

Quizplus · Accepted Answer

In order to maintain the same level of utility, we need to set the initial utility equal to the new utility:

10(1) + 5y = 10(10) + 5(9)

Simplifying:

10 + 5y = 145

5y = 135

y = 27

Therefore, Doreen must have 27 units of good y in order to be as well off as before. The answer is option C.

Doreen Has Preferences Represented by the Utility Function U(x, Y)