Linus has utility function U(x, y)= x + 2y.If the price of x is $1 and the price of y is .50 cents then Linus must consume equal amounts of both goods in order to maximize his utility.

Question

Quizplus · Accepted Answer

Linus must consume goods x and y in the ratio of their prices in order to maximize his utility. In this case, the ratio of prices is 1:0.5, so Linus should consume twice as much y as x, not equal amounts of both.

Linus Has Utility Function U(x, Y)= X + 2y