Asked by Jordanna Porter on Apr 29, 2024
Verified
The marginal utility of the last unit of apples consumed is 12, and the marginal utility of the last unit of bananas consumed is 8. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?
A) $4 and $6
B) $6 and $4
C) $8 and $12
D) $16 and $9
Marginal Utility
The additional satisfaction or benefit received from consuming one more unit of a good or service.
- Determine the circumstances that lead to the maximization of consumer utility.
- Comprehend the effects of price variations on marginal utility and decision-making processes of consumers.
Verified Answer
HP
HARINDER PAL SINGHMay 03, 2024
Final Answer :
B
Explanation :
In consumer equilibrium, the ratio of the marginal utilities (MU) of two goods should equal the ratio of their prices. Thus, MU of apples/MU of bananas = Price of apples/Price of bananas. Given MU of apples is 12 and MU of bananas is 8, the price ratio that maintains consumer equilibrium is 12/8 or 3/2. Among the options, only option B ($6 and $4) reflects this ratio, as 6/4 = 3/2.
Learning Objectives
- Determine the circumstances that lead to the maximization of consumer utility.
- Comprehend the effects of price variations on marginal utility and decision-making processes of consumers.