The combination of Good A and Good Z that gives consumer equilibrium can be computed by...
The combination of Good A and Good Z that gives consumer equilibrium can be computed by which of the following?
| a. | Marginal utility of Good A/price of Good A = marginal utility of Good Z/price of Good Z | b. | Using the total utility of Good A/price of Good A = total utility of Good Z/price of Good Z |
|---|---|---|---|
| c. | Price of Good A/marginal utility of Good A = price of Good Z/marginal utility of Good Z | d. | Using the marginal utility of Good Z/price of Good A = marginal utility of Good Z/price of Good A |
Homework Answers
Solution: Marginal utility of Good A/price of Good A = marginal utility of Good Z/price of Good Z
Explanation: The consumer equilibrium is achieved at a point where:
MUa/Pa = MUz/Pz
Qa * Pa + Qz * Pz = Y; where Qa: (a) quantity; Qz: (z) quantity; Pa: (a) price; Pz: (z) price
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