The price of good X is $1.50 and that of good Y, $1.A particular consumer who evaluates the marginal utility of Y to be 30 units, and is in equilibrium with respect to purchases of X and Y, must consider the marginal utility of X to be:
A)15 units.
B)20 units.
C)30 units.
D)45 units.
E)none of the above.

Question

Quizplus · Accepted Answer

In equilibrium, the ratio of the marginal utilities of two goods equals the ratio of their prices. Thus, if the marginal utility of Y is 30 units and its price is $1, and the price of X is $1.50, then the marginal utility of X must be 1.5 times that of Y to maintain equilibrium. Therefore, the marginal utility of X is 30 units * 1.5 = 45 units.

The Price of Good X Is $1