Use the following to answer the questions below:
- z is the marginal utility per dollar measured in utils, x is the amount spent on product A, and y is the amount spent on product B.
- Assume MUA = z = 30 – x and MUB = z = 63 – 2y.
- Assume that the consumer has $30 to spend on A and B; that is, x + y = 30. What is the marginal utility per dollar? What is best way to allocate the expenditure of the $30?
Both MU per dollar should be equal in equilibrium, thus: 10-x=21-2y , which simplifies to: x=2y-11 Budget constraint... View the full answer