The price of X is $20 and the price of Y is $40.

-Based on the above graph,if U₁ is the highest level of utility the consumer can achieve,what is the consumer's income?

Question

The price of X is $20 and the price of Y is $40.

-Based on the above graph,if U₁ is the highest level of utility the consumer can achieve,what is the consumer's income?

Quizplus · Accepted Answer

According to the graph, the consumer can achieve the highest level of utility by purchasing 8 units of X and 4 units of Y. This would cost ($20 x 8) + ($40 x 4) = $240. Since the consumer is willing to spend all of their income to achieve this level of utility, their income must be $240 / 0.3 (which is the slope of the budget line). This gives an income of $800. Therefore, the correct answer is (C) $800.

The Price of X Is $20 and the Price of Y