Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18. Which of the following represents the demand schedule for X?

Question

Answer the question on the basis of the following marginal utility data for products X and Y. Assume that the prices of X and Y are $4 and $2, respectively, and that the consumer's income is $18.  Which of the following represents the demand schedule for X?

Quizplus · Accepted Answer

The demand schedule for X can be determined by finding the point at which the marginal utility per dollar of X is equal to that of Y. From the given data, we can see that this occurs at the fifth unit of X. At this point, the marginal utility per dollar of both X and Y is 2. Therefore, the consumer will purchase 5 units of X and 4 units of Y for a total expenditure of $18. The demand schedule for X is thus (in terms of quantity and price):

1. 0 units at $4
2. 1 unit at $4
3. 2 units at $4
4. 3 units at $4
5. 4 units at $4
6. 0 units at $4 (because the marginal utility of the fifth unit is less than that of Y at its price of $2)

So the correct answer is B.

Answer the Question on the Basis of the Following Marginal