Ella's utility function is min{ 5x, y}. If the price of x is $20 and the price of y is $20, how much money would she need to be able to purchase a bundle that she likes as well as the bundle (x, y) = (7, 15)?
A) $440
B) $360
C) $177
D) $372
E) $72

Question

Quizplus · Accepted Answer

Ella's utility function is min{5x, y}, meaning she wants 5 times as much x as y. For the bundle (7, 15), 5x = 35 and y = 15, so she is limited by y. To satisfy her utility, she needs 5x = y, so she needs 3 units of x and 15 units of y. The cost is 3*20 + 15*20 = $360.

Ella's Utility Function Is Min{ 5x, Y}