Louis's utility function is U = 10X + 6Y. Louis has a budget of $60 to spend on goods X and Y. The price of good X is $3 and the price of good Y is $2. How many units of good X and good Y does Louis purchase?
A) X = 20 and Y = 0
B) X = 0 and Y = 10
C) X = 30 and Y = 0
D) X = 10 and Y = 20

Question

Quizplus · Accepted Answer

Louis maximizes his utility by spending his entire budget on good X, as it provides more utility per dollar spent (10/3 > 6/2). Thus, he buys 20 units of X and 0 units of Y.

Louis's Utility Function Is U = 10X + 6Y