Question: You are choosing between two goods, X and Y, and your marginal utility from each is as shown below. if your income is $9 and the price of X and Y are $2 and $1, respectively,
Units of X Marginal Utility for X
1 10
2 8
3 6
4 4
5 3
6 2
Units of Y Marginal Utility for Y
1 8
2 7
3 6
4 5
5 4
6 3
a) What quantities of each will you purchase to maximize utility?
b) What total utility will you realize?
c) Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase?
d) Using the two prices and quantities for X (the demand for X when price is $1 and the demand for X when the price is $2) derives the price elasticity of demand for X.