Answer to Question #139800 in Microeconomics for Emmanuel

Question

A consumer’s utility function is:
U = 20 XY
Where U is the consumer’s utility, X is the amount of good X consumed per month, and Y is the amount of good Y consumed per month
(a ) If the consumer is consuming 5 units of good Y per month, what is the marginal utility of good X?
(b ) Can you answer question (a ) without knowing how many units of good X the consumer is consuming?
( c ) Is this utility function realistic? What “law” does it violate?

Answer 1

U= 20XY

a. Good Y=5 units

$MUx$ = 20Y

$MUx$ = 20*5=100

b. Yes, there is no need to find out quantity of good X in order to find the answer for part a. As the MU for good X doesn't depend on good X.

c.Law of diminishing Marginal utility is being depicted in this case.

MU of good x= 20Y

MU of good y= 20X

MU of good X cannot be changed throughout life. As there is no fall in MU of good X when quantity of good X rises.