Question

Suppose that Mr. Whipple spends his entire income on Charmin and Kleenex. The marginal utility of each good is shown below. The price of Charmin is $2 and the price of Kleenex is $3. How many units of each good should he purchase, assuming he has $20 to spend?

		Marginal Utility
Number of Units Consumed		Charmin	Kleenex
1		16	30
2		14	25
3		12	20
4		10	15
5		8	10
6		6	5
7		4	2

Group of answer choices

3 rolls of Charmin, 2 boxes of Kleenex

4 rolls of Charmin, 4 boxes of Kleenex

5 rolls of Charmin, 3 boxes of Kleenex

1 roll of Charmin, 6 boxes of Kleenex

7 rolls of Charmin, 2 boxes of Kleenex

Answer 1

When there are more than two commodities consumer maximize utility when he distribute his income between two goods in such a way that the utility derive from last rupeespend on each good is equal. Thus the consumer is in equilibrium when It satisfies  

Number	MU of charmin	MU of Kleenex	MU of charmin/Px	MU of Kleenex/py
1	16	30	8	10
2	14	25	7	8.333333333
3	12	20	6	6.666666667
4	10	15	5	5
5	8	10	4	3.333333333
6	6	5	3	1.666666667
7	4	2	2	0.666666667

From the schedule we can under stand that , marginal utility/price ratios of both goods are equal when he consumer 4 Units of both good.

Now check whether he spends his entire income when he consumes 4 units of both goods. Because when consumer maximise utility he must spend his entire income.

Price of charmin* quantity of charmin+ price of kleenex * quantity of kleenex= Money income*

4*2+4*3=20

Thus consumer maximise utility when he consumes 4 units of both.

ANSWER OPTION B: 4 ROLLS OF CHARMIN AND 4 BOXES OF KLEENEX