Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
2 units of X and 6 units of Y
B
3 units of X and 4 units of Y
C
4 units of X and 0 units of Y
D
5 units of X and 3 units of Y
Understanding the Answer
Let's break down why this is correct
Answer
To maximize utility with a budget of $100 while buying goods X and Y, we need to consider the prices of both goods. The price of good X is $20, so if a consumer buys 0 units of Y, they can buy 5 units of X (100 divided by 20). Conversely, if they buy only good Y at $10 each, they can purchase 10 units (100 divided by 10). To find the best combination, the consumer can buy 4 units of X for $80 and 2 units of Y for $20, using the entire budget and balancing their spending. This combination allows the consumer to enjoy both goods while utilizing their budget fully, which is key to maximizing their overall satisfaction or utility.
Detailed Explanation
To maximize utility, you need to spend your budget wisely. Other options are incorrect because This choice spends $20 on X and $60 on Y, totaling $80; Buying 4 units of X costs $80, leaving $20.
Key Concepts
utility maximization
Topic
Maximizing Utility with Budgets
Difficulty
easy level question
Cognitive Level
understand
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