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Questions › DSE › DSE 2008 › Q7
1 markMicroeconomics › Budget constraint and consumer equilibrium › Demand under complements, substitutes and quasilinear utilityHardabout 3 min

DSE 2008 Question 7: Budget constraint and consumer equilibrium

Suppose a consumer has utility function U=min⁡{x+y, 2y}U=\min\{x+y,\ 2y\}U=min{x+y, 2y}. He maximizes utility subject to his budget constraint and consumes (x∗,y∗)=(3,3)(x^{*},y^{*})=(3,3)(x∗,y∗)=(3,3). Which one of the following statements must be true?

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Suppose a consumer has utility function U=min {x+y, 2y}. He maximizes utility subject to his budget constraint and consumes (x*,y*)=(3,3). Which one of the following statements must be true? (A) price of good x is necessarily equal to price of good y (B) price of good x is double the price of good y (C) price of good x is less than or equal to price of good y (D) none of the above.

Budget constraint and consumer equilibrium has come up 99 times in 7 exams since 2004.

What this question tests

This question is on Demand under complements, substitutes and quasilinear utility, part of Budget constraint and consumer equilibrium in Microeconomics.

Deriving demand when preferences are L-shaped, linear or quasilinear, and what that implies for income and price responses.

TestStop has 23 past-paper questions on this subtopic; the nearest in year are below.

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Question from the DSE 2008 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.