Leo's utility function is min{x, 3y + 2z}.The price of x is $1, the price of y is $9, and the price of z is $8.Leo's income is $8.How many units of x does Leo demand?
A)2
B)1.60
C)5
D)7
E)None of the above.

Question

Quizplus · Accepted Answer

The marginal utility of x is 1, the marginal utility of y is 3, and the marginal utility of z is 2. So, Leo will demand x until the marginal utility of x is equal to the price of x, which is $1. So, Leo will demand 2 units of x.

Leo's Utility Function Is Min{x, 3y + 2z}