The consumer's utility function for goods X and Y is U = 3X + 15Y. Good...
The consumer's utility function for goods X and
Y is U = 3X + 15Y. Good
X is placed on the x-axis and good Y is
placed on the y-axis. Which of the following statements is
TRUE?
I. The marginal utility of good Y is 15.
II. The MRSXY = 5.
III. The consumer is always willing to trade away 5 units of good
X for 1 unit of good Y.
| A. |
I, II, and III |
|
| B. |
I and III |
|
| C. |
I and II |
|
| D. |
II only |
Homework Answers
As it is given that the consumer's utility function for goods X and Y is U = 3X + 15Y.
Good X is placed on the x-axis and good Y is placed on the y-axis.
MU=dU/dX
MUX=3(1)+0
=3
MUY=dU/dY
=0+15(1)
=15
MRS of XY=MUx/MUy
=3/15
=1/5
Since MU of X is 3 and MU of Y is 15. It means that the consumer is always willing to trade away 5 units of good X for 1 unit of good Y.
It means statement I and III are correct.
Hence option B is the correct answer.
Add Answer to:
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