Based on the following graph,if the price of X is $7.50 per unit,how many units of X will a utility-maximizing consumer choose? The consumer's income is $600.
A)25
B)30
C)35
D)50
E)none of the above

Question

Based on the following graph,if the price of X is $7.50 per unit,how many units of X will a utility-maximizing consumer choose?  The consumer's income is $600.
A)25 
B)30 
C)35 
D)50 
E)none of the above

Quizplus · Accepted Answer

At the price of $7.50, the consumer would choose the quantity of X where the marginal utility per dollar spent is equal to the marginal utility per dollar spent on other goods. This occurs at a quantity of 35 units of X, where the MU/Price of X is equal to the MU/Price of Y (the other good). At this point, the consumer would have spent a total of $262.50 on X and have $337.50 remaining to spend on Y, which could be spent on up to 112.5 units of Y (at a price of $3 per unit). Therefore, the consumer's optimal consumption bundle would be 35 units of X and 112.5 units of Y.

Based on the Following Graph,if the Price of X Is