A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 70 units and Y is 52 units. The unit price of X is R92. The price of a unit of Y is:
To find the price of a unit of Y, we need to compare the marginal utility per unit of each product to the unit price.
The consumer is in equilibrium when the ratio of marginal utility to price is equal for both products.
For product X: Marginal Utility of X / Price of X = 70 / 92 = 0.76
For product Y: Marginal Utility of Y / Price of Y = 52 / Price of Y
Since the consumer is spending income in such a way that the marginal utility of product Y is less than the marginal utility of product X, we know that the price of product Y must be lower than the price of product X.
Therefore, to maintain equilibrium, the price of a unit of Y must be less than R92.