consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 99 units and Y is 25 units. The unit price of X is R87. The price of a unit of Y is:
To determine the price of a unit of Y, we can use the concept of marginal utility per dollar. This concept states that the consumer is in equilibrium when they are allocating their spending so that the marginal utility per dollar spent on each product is the same.
In this case, the marginal utility of product X is 99 units and the unit price of X is R87. Therefore, the marginal utility per dollar spent on X is:
MUx / Px = 99 / 87 = 1.14
Since the consumer is in equilibrium, the marginal utility per dollar spent on Y should also be equal to 1.14. Given that the marginal utility of Y is 25 units, we can set up the equation:
MUy / Py = 25 / Py = 1.14
Solving for Py:
25 / Py = 1.14
Py = 25 / 1.14
Py ≈ R21.93
Therefore, the price of a unit of Y is approximately R21.93.