Concept introduction:
Budget Line: It is defined as the combination of all goods that a consumer can buy exhausting his all income. Formula for the budget line is:
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 1](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_1.png)
Here,
is the quantity of good X.
is the quantity of good Y.
is the total income.
is the price of good X.
is the price of good Y.
is the marginal utility.
is the total utility.
- X is the quantity of any good.
- N is the number of goods.
is the marginal utility per dollar.
is the price of good X.
is the marginal utility of good X.
is the marginal utility of good Y.
is the price of good X.
is the price of good Y.
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 7](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_7.png)
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 8](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_8.png)
Here,
Marginal Utility per dollar: It is the ratio of marginal utility to that of the price of a good. The formula to calculate the marginal utility per dollar is:
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 11](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_11.png)
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 12](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_12.png)
Here,
Maximizing utility in the case of two goods: It states that the equilibrium level of consumption of two goods for a consumer is achieved when the marginal utility per dollar of the two goods are equal. This means that the following conditions must be fulfilled:
![Achieve for Economics (1-Term Online), Chapter 10, Problem 4P , additional homework tip 15](https://content.bartleby.com/tbms-images/9781464143847/Chapter-10/images/html_43847-10-4p_15.png)
Here,
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Chapter 10 Solutions
Achieve for Economics (1-Term Online)
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