Asked by Ishmail Mgwena on Jul 27, 2024
Verified
The marginal utility of the last unit of apples consumed is 10, and the marginal utility of the last unit of bananas consumed is 15. What set of prices for apples and bananas, respectively, would be consistent with consumer equilibrium?
A) $3 and $2
B) $2 and $3
C) $15 and $10
D) $25 and $30
Marginal Utility
The additional satisfaction or benefit received by a consumer from consuming one more unit of a good or service.
Consumer Equilibrium
A state in microeconomics where a consumer achieves the highest satisfaction possible, given their income constraints and prices of goods and services.
Prices
The amount of money required to purchase a good or service, reflecting the value placed on it by the market.
- Grasp the method by which choosing the best mix of products within financial limitations enhances utility.
- Outline the interplay between total utility, marginal utility, and consumer stability in economic terms.
Verified Answer
AM
Amardeo MaximeJul 28, 2024
Final Answer :
B
Explanation :
In consumer equilibrium, the ratio of the marginal utilities of two goods should equal the ratio of their prices. Thus, MUapplesMUbananas=PriceapplesPricebananas \frac{MU_{apples}}{MU_{bananas}} = \frac{Price_{apples}}{Price_{bananas}} MUbananasMUapples=PricebananasPriceapples . Given MUapples=10 MU_{apples} = 10 MUapples=10 and MUbananas=15 MU_{bananas} = 15 MUbananas=15 , the price ratio that maintains consumer equilibrium is 1015=23 \frac{10}{15} = \frac{2}{3} 1510=32 , which corresponds to the prices in option B, $2 for apples and $3 for bananas.
Learning Objectives
- Grasp the method by which choosing the best mix of products within financial limitations enhances utility.
- Outline the interplay between total utility, marginal utility, and consumer stability in economic terms.