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    Question

    The utility function of X is such that X likes to

    consume 2 units of lemon with every 1 liter of water. The price of lemon is Rs.1.00 and that of 1 liter of water is Rs.18. What is the maximum utility of X given that her income is Rs.200
    A 5 Correct Answer Incorrect Answer
    B 10 Correct Answer Incorrect Answer
    C 15 Correct Answer Incorrect Answer
    D 20 Correct Answer Incorrect Answer

    Solution

    U (W, L) = min (2w, L) At Utility maximizing Level 2W = L = U P(lemon) = 1 P(water) = 18 BL: 1(L) + 18(W) = 200 2W + 18W = 200 W = 10 Therefore, L = 2(10) = 20 U = min {2W, L} = 20

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