Question 1
Jon is consuming X and Y so that he is spending his entire income and
MU
x/
P
x = 4 and
MU
y/
P
y = 4. To maximize utility, he should consume
◦ the same amount of X and Y since he is already maximizing utility.
◦ less of both X and
Y.
◦ more X and less
Y.
◦ less X and more
Y.
Question 2
If
MU
x/
P
x <
MU
y/
P
y, then
◦ spending a dollar less on Y and a dollar more on X increases utility.
◦ spending a dollar less on
X and a dollar more on Y increases utility.
◦ X is more expensive than
Y.
◦ Y is more expensive than
X.
