Maria is considering her lunch purchase.Unfortunately,the deli doesn't have a very extensive menu: apples at $0.50 each,bagels at $1 each,and cappuccino at $2 each.Her utility from each is shown in the table below.

-Assume that Gina is allocating her budget optimally between two products.If the MU of product X is 40 and its price is $8,what must be the price of product Y if its MU is 60?
A)$7.50.
B)$12.
C)$16.
D)$40.
E)$300.

Question

Maria is considering her lunch purchase.Unfortunately,the deli doesn't have a very extensive menu: apples at $0.50 each,bagels at $1 each,and cappuccino at $2 each.Her utility from each is shown in the table below.
 
-Assume that Gina is allocating her budget optimally between two products.If the MU of product X is 40 and its price is $8,what must be the price of product Y if its MU is 60?
A)$7.50. 
B)$12. 
C)$16. 
D)$40. 
E)$300.

Quizplus · Accepted Answer

According to the principle of utility maximization, the consumer allocates their budget in such a way that the marginal utility per dollar spent on each good is equal. This can be represented by the equation MUx/Px = MUy/Py. Given MUx = 40, Px = $8, and MUy = 60, we can solve for Py: 40/8 = 60/Py, which simplifies to 5 = 60/Py. Solving for Py gives Py = $12.

Maria Is Considering Her Lunch Purchase