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17 October, 00:28

Suppose the following information is true : MUcar = 36,000, MUcoke = 1.5, MUhouse = 450,000, Pcar = $12,000, and Phouse = $150,000, what must the price of coke be if the consumer is in equilibrium? a. $3. b. $0.30. c. $50. d. $0.50 e. $5.

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  1. 17 October, 00:54
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    The correct answer is d. $0.50

    Explanation:

    Marginal utility is the extra satisfaction that is derived from consuming an extra unit of a product.

    If the consumer is to be at equillibrum then his marginal utility to price ratio for all the commodities must be equal

    We are given

    MUcar = 36,000

    MUcoke = 1.5

    MUhouse = 450,000

    Pcar = $12,000

    Phouse = $150,000

    MU to price ratio for car = 36,000/12,000 = 3

    MU to price ratio for house = 450,000/150,000 = 3

    So ratio of marginal utility to price for coke must be equal to 3 at equillibrum

    MU to price ratio for coke = 1.5/x = 3

    Cross multiplying

    x = 1.5/3 = $0.5

    So price of coke must be $0.5 at equillibrum
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Home » Business » Suppose the following information is true : MUcar = 36,000, MUcoke = 1.5, MUhouse = 450,000, Pcar = $12,000, and Phouse = $150,000, what must the price of coke be if the consumer is in equilibrium? a. $3. b. $0.30. c. $50. d. $0.50 e. $5.
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