Suppose a consumer has preferences over two goods,X and Y,which are perfect substitutes.In particular,two units of X is equivalent to one unit of Y.If the price of X is $1,the price of Y is $3,and the consumer has $30 of income to allocate to these two goods,how much of each good should the consumer purchase to maximize satisfaction?
A) 30 units of X and 0 units of Y
B) 0 units of X and 10 units of Y
C) 15 units of X and 5 units of Y
D) 12 units of X and 6 units of Y

Question

Quizplus · Accepted Answer

The consumer should purchase 30 units of X and 0 units of Y because X is cheaper per unit of utility. Two units of X ($2) provide the same utility as one unit of Y ($3), so the consumer maximizes utility by spending all income on X.

Suppose a Consumer Has Preferences Over Two Goods,X and Y,which