Question

Suppose a particular consumer has 8 birr to be spent on two goods A and B the unit price of goods A is 2 birr and the unit price of B is 1 birr.
The marginal utility (MU) she gets from consumption of the goods is given below

Answer 1

a. The utility is maximized when $\frac{MUA}{PA}=\frac{MUB}{PB} ​$

 and

$PA \times QA + PB \times QB = 8.$

Both equities are true if QA = 2 units and QB = 4 units.

b. The total utility at the utility maximization level is:

$TU = (36 + 24) + (30 + 22 + 16 + 12) = 140 units.$