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"A person has the following utility function: U=2XY where X is

one good and Y is another.
a.What is the person's marginal utility of Y if that person
consumes 10 units of X?

1 Answer

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Final answer:

For a utility function U=2XY, the marginal utility of good Y when 10 units of X are consumed is 20 utils. Marginal utility is the additional satisfaction obtained by consuming one more unit of a good, and satisfaction per dollar measures utility per dollar spent.

Step-by-step explanation:

The student's question pertains to the concept of marginal utility, which in the context of a utility function U=2XY, refers to the additional utility received from consuming an extra unit of good Y while holding the quantity of good X constant. For the given utility function, when a person consumes 10 units of good X, the marginal utility of good Y (MUY) can be calculated as the partial derivative of the utility function with respect to Y, which gives MUY = 2 * X. By substituting the value of X with 10, we get MUY = 2 * 10 = 20.

This indicates that the marginal utility of consuming one additional unit of good Y, when 10 units of X are consumed, is 20 utils. It's important to note that satisfaction per dollar is a way to measure the worth of a good in terms of utility received per dollar spent, and marginal utility per dollar is the amount of additional utility received divided by the product's price.

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