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The marginal utility of the last unit of good X is 30 utils and its price is Rs.10; the marginal utility of the last unit of good Y is 16 utils. For two-good equilibrium, the price of Y should be:
ARs. 4.80
BRs. 6.00
CRs. 5.33
DRs. 18.75
Answer & Solution
Correct answer: C. Rs. 5.33
1. Equilibrium needs $\frac{MU_x}{P_x} = \frac{MU_y}{P_y}$, so $\frac{30}{10} = \frac{16}{P_y}$.
2. This gives $3 = \frac{16}{P_y}$, hence $P_y = \frac{16}{3} = 5.33$.
3. Rs.4.80 wrongly multiplies the ratio, Rs.6.00 reverses it, and Rs.18.75 inverts the proportion, so all are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.7_
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