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JAMB Economics 2005 Question 29

Question 29

Theory of Consumer Behaviour

If the marginal utility of the last unit of commodity X at N2 is 16 and that of commodity Y at N4 is 24, the consumer will be at equilibrium when

  1. A.the price-quantity ratios are equal
  2. B.equal amounts of X and Y are consumed
  3. C.less of Y and more of X are consumed
  4. D.less of X and more of Y are consumed
Show the answer and explanation

Answer: C (less of Y and more of X are consumed)

Explanation

X gives 16 ÷ 2 = 8 utils per naira and Y gives 24 ÷ 4 = 6. To equalise MU per naira, the consumer buys more X (lowering its MU) and less Y (raising its MU).