In the above. The price of commodity \(\mathrm{y}\) is \(\mathrm{N} 2\) and that of \(x\) is \(\mathrm{H} 1\) while the individual has an income of \(+12\). Determine the combination of the two commodities the individual should consume to maximize his utility
A. \(6 y\) and \(4 x\) B. \(3 y\) and \(6 x\) C. \(5 y\) and \(5 x\) D. \(3 y\) and \(3 x\)
Correct Answer: B
Explanation
The consumer will be at equilibrium when \(\frac{\mathrm{MU}_{1}}{P_{1}}=\frac{\mathrm{MU}_{2}}{P_{1}}\) This happens at 3 units of consumer 's income is exhausted. This happens at 3 units of \(y\) and 6 units of \(x\) \(\frac{\mathrm{MU}_{1}}{P_{1}}=\frac{\mathrm{MU}_{i}}{P_{s}}=\frac{12}{2}=\frac{6}{1}\) The income is also exhausted: $$ \begin{array}{l} P_{1}\left(Q_{1}\right)+P_{1}\left(Q_{1}\right)=\text { Income } \\ 2(3)+1(6)=12 \end{array} $$
