Asked by Dylan Gauthier on May 31, 2024
Verified
If MU a/ Pₐ = 100/$35 = MU b/ Pᵦ = 300/? = MU c/ Pc = 400/?, the prices of products B and C in consumer equilibrium
A) cannot be determined from the information given.
B) are $105 and $140, respectively.
C) are $105 and $175, respectively.
D) are $100 and $200, respectively.
Consumer Equilibrium
A state in which a consumer has allocated their income in a way that maximizes their utility, given their budget constraint.
MU/P Ratio
The Marginal Utility to Price ratio, used in economic analysis to evaluate the satisfaction received from consuming an additional unit of a good relative to its cost.
- Ascertain the most favorable consumption mix for utility maximization in consumer choice theory.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
B
Explanation :
The consumer equilibrium condition is given by the equation MUa/Pa = MUb/Pb = MUc/Pc. For product B, solving 300/? = 100/35 gives Pb = $105. For product C, solving 400/? = 100/35 gives Pc = $140.
Learning Objectives
- Ascertain the most favorable consumption mix for utility maximization in consumer choice theory.