1. The MU schedule for goods A and B is given. Price of both the goods is ₹1 each and income of Mr. Narendra is assumed to be ₹6.How many units of both the goods should be purchased by him so that his total utility is maximized?

Units

1

2

3

4

5

6

MUA

14

12

10

6

4

2

MUB

13

12

10

3

2

1

At equilibrium,
MUA÷PA = MU÷ PB = MUm
and the entire income is spent on commodity-X and commodity-Y.

Since PA =  PB = 1,
MUA = MUB = MUM

The consumer gets maximum satisfaction when he purchases 3 units of A and 3 units of B. Because at this combination, MUA = MUB = 24 and the entire income of Rs 6 gets spent.

Regards

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