Diminishing marginal utility?
a.consume more of X and more of Y.
b.keep consuming the current amounts of both X and Y
c.consume more of Y and less of X
d. realize that you don't have enough information to answer the question.
Answer:
D
I would guess c initially because it makes the most sense, and may likely be true.
However with diminishing marginal utility and no function to tell how quickly the utility on either good diminishes i bilieve d would make more sense
TUx/Px = 20/$1 = 20 units of utility per $1 spent on x
TUy/Py = 16/$.0.75 = 21.33 units of utility per $1 spent on y originally
TUy/Py = 16/$0.60 = 26.67 units of utility per $1 spent on y now
But you don't know how MU is changing or how much money you have. Therefore the correct answer is D...
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