-Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question.Assume the price of Y is $1 per unit.If the price per unit of good X is $3,the consumer would maximize utility by consuming
A)30 units of Y.
B)21 units of Y.
C)10 units of Y.

Question

-Use the indifference curves and the budget lines in Figure 19.3 to answer the indicated question.Assume the price of Y is $1 per unit.If the price per unit of good X is $3,the consumer would maximize utility by consuming
A)30 units of Y. 
B)21 units of Y. 
C)10 units of Y.

Quizplus · Accepted Answer

At a price of $3 per unit of X and $1 per unit of Y, the budget line is represented by line AC in the diagram. The consumer can afford to buy either 15 units of X and 15 units of Y or 30 units of Y and no X. The indifference curves represent different levels of utility for the consumer, with higher curves indicating higher levels of satisfaction. The consumer will choose the point where the highest indifference curve is tangent to the budget line, which is point P in the diagram. At point P, the consumer is consuming 21 units of Y and 7 units of X, which maximizes their satisfaction given their budget constraint. Therefore, the answer is B, 21 units of Y.

-Use the Indifference Curves and the Budget Lines in Figure