Question

Doreen has preferences represented by the utility function U(x, y) = 10x + 5y. She consumes 10 units of good x and 9 units of good y. If her consumption of good x is lowered to 1, how many units of y must she have in order to be exactly as well off as before?

Answer 1

she must consume 11 units of good Y

Step-by-step explanation:

Doreen's current utility = (10 x 10) + (5 x 9) = 145 utils

if she consumes only 9 goods of X, her utility will be:

90 + 5Y

the amount of good Y that makes both equations equal is:

90 + 5Y = 145

5Y = 55

Y = 55 / 5 = 11 units