Murphy used to consume 100 units of X and 50 units of Y when the price of X was $2 and the price of Y was $4.If the price of X rose to $6 and the price of Y rose to $5, how much would Murphy's income have to rise so that he could still afford his original bundle?
A)$750
B)$250
C)$450
D)$500
E)None of the above.

Question

Quizplus · Accepted Answer

Murphy's original consumption pattern costs him: 
$(100 units of X * $2) + (50 units of Y * $4) = $200 + $200 = $400

If the price of X rises to $6 and the price of Y rises to $5, the original bundle will cost him: 
(100 units of X * $6) + (50 units of Y * $5) = $600 + $250 = $850

So, Murphy's income would have to rise by $450 ($850-$400) to afford his original bundle. Therefore, the answer is (C) $450.

Murphy Used to Consume 100 Units of X and 50