Marsha Mellow is very flexible.She consumes x and y.She says, "Give me x or give me y, I don't care.I can't tell the difference between them." She is currently endowed with 8 units of x and 17 units of y.The price of x is 3 times the price of y.Marsha can trade x and y at the going prices but has no other source of income.How many units of y will Marsha consume?
A)17
B)44
C)25
D)41
E)21

Question

Quizplus · Accepted Answer

Given Marsha's indifference between x and y, she will aim to maximize her total consumption of goods. Since the price of x is 3 times the price of y, she can trade her 8 units of x for 24 units of y (because 8x = 24y, given the price ratio). Adding these 24 units to her initial endowment of 17 units of y gives her a total of 41 units of y.

Marsha Mellow Is Very Flexible