FIGURE 6- 2
-Refer to Figure 6- 2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should
A)buy the same amount of X but less Y.
B)make no changes-he is already maximizing his total utility.
C)buy less of X and more Y.
D)buy more of X but the same amount Y.
E)buy more of X and less Y.

Question

FIGURE 6- 2 
-Refer to Figure 6- 2.Suppose the price of X is $2,the price of Y is $1,and the consumer's income is $10.The consumer is currently buying 4 units of good X and 2 units of good Y.In order to maximize his utility,he should
A)buy the same amount of X but less Y. 
B)make no changes-he is already maximizing his total utility. 
C)buy less of X and more Y. 
D)buy more of X but the same amount Y. 
E)buy more of X and less Y.

Quizplus · Accepted Answer

If the price of X is $2, the consumer is currently spending $8 on X (4 units x $2 per unit) and $2 on Y (2 units x $1 per unit). This adds up to the consumer's income of $10.

To maximize utility, the consumer should allocate their income in a way that equals the ratio of the marginal utility of X to the marginal utility of Y, which is currently 4:8. However, the consumer is buying more X than Y, so they should reduce their consumption of X and increase their consumption of Y.

Buying less of X and more of Y would allow the consumer to increase their total utility without exceeding their income constraint. Therefore, the best choice is C.