Savita consumes 2 goods X and Y. If marginal utility of X is 30 utils and that of Y is 45 utils. Prices of both goods X and Y are 3 and 5 respectively. Savita will consume
(
This question was previously asked in
Shift 01/06/2023 8:30 AM - 11:30 AM
Correct Answer
Detailed Explanation
1.To determine Savita's consumption decisions, we can use the concept of marginal utility and the law of diminishing marginal utility. The law of diminishing marginal utility states that as a person consumes more of a good, the additional satisfaction (marginal utility) derived from each additional unit of that good decreases.
Given that the price of X is 3 and the price of Y is 5, we should consider the marginal utility per unit of each good relative to their prices. To do this, we calculate the marginal utility per dollar spent on each good:
- For good X: Marginal Utility (X) / Price (X) = 30 / 3 = 10 utils per dollar.
- For good Y: Marginal Utility (Y) / Price (Y) = 45 / 5 = 9 utils per dollar.
Savita will consume more of the good with the higher marginal utility per dollar spent, which in this case is good X. She will maximize her utility by purchasing more of good X since she gets more satisfaction (utils) for each dollar spent on it.
So, the answer is (1) More of good X.
Get Dubuddy App
Practice on the go with our mobile app
More CUET Questions
Capital Account of balance of payment includes:
(A) Export and Import of goods
(B) Receipt of loans from abroad
(C) Purchase of shares in foreign countries
(D) Current transfers from Abroad
(E) Repayment of International loans
Choose the correct answer from the options given below :
(
In a market Economy; prices are determined by :
(
The notable estimators - Dadabhai Naoroji, William Dighy, Findlay Shirras, V.K.R.V. Rao and
R.C. Desai during the colonial period estimated.
(
Distribution of output relates to which central problem of an Economy ?
(
Test Series
CUET Subjects
Your CUET Journey Starts with DuBuddy
CUET ki Practice Means DuBuddy Pe Practice