Advanced Higher Economics Practice Questions - Scottish Advanced Higher Economics (C820 77) Exam

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A consumer consumes two goods, X and Y. At their current consumption bundle, the marginal utility of X is 40 utils and its price is £10. The marginal utility of Y is 60 utils and its price is £12. To maximise total utility subject to their budget constraint, what should the consumer do?

Increase consumption of Y and decrease consumption of X Increase consumption of X and decrease consumption of Y Keep consumption of both goods unchanged because total utility is already maximized Decrease consumption of both goods to reduce total expenditure

Correct Answer:

Increase consumption of Y and decrease consumption of X

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