Consider a consumer with a monthly budget of $80 who wants to purchase two goods, X and Y. If good X costs $16 and good Y costs $8, which combination of these goods would yield the highest level of satisfaction while adhering to the budget constraint?

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Seekh · Accepted Answer

A consumer with an $80 budget can spend all of it on good X, all on good Y, or any mix that adds up to $80. Because X costs $16 and Y costs $8, buying 5 X uses the entire budget (5 × $16 = $80). Buying 10 Y also uses the entire budget (10 × $8 = $80). Any mix that satisfies 16 × X + 8 × Y = 80 also works, such as 4 X and 2 Y (4 × $16 + 2 × $8 = $80). If the consumer values each good equally per dollar spent, every budget‑satisfying mix gives the same level of satisfaction.

Consider a consumer with a monthly budget of $80 who wants to purchase two goods, X and Y. If good X costs $16 and good Y costs $8, which combination of these goods would yield the highest level of satisfaction while adhering to the budget constraint?

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