Please answer the following You are choosing between two goods, X and Y. and you
ID: 1094124 • Letter: P
Question
Please answer the following
You are choosing between two goods, X and Y. and your marginal utility from each is as shown below. Instructions: Enter your answers as whole numbers. If your income is $9.00 and the prices of X and Y are S2.00 and S1.00, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1.00. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X. Instructions: Start with the highest price first.Explanation / Answer
Price of X / Price of Y = MU(X) / MU(Y)
When Px = 2, Py = 1
and PxX + PyY = 9
X = 2
Y = 5
Total utility = MU(x=1) + MU(x=2) + MU(y=1) + MU(y=2) + MU(y=3) + MU(y=4) + MU(y=5) = 96
Now MU(x) / MU(y) = 1
Budget constraint: X + Y = 9
X = 4 , Y = 5
Demand for X:
X = -2P + 6
Q 2 3 4 5 P 2 1.5 1 0.5