Reeta buys only compact discs and tapes and spends all her income. The marginal utility from a compact disc is 30 and the marginal utility from a tape is 20. The price of a compact disc is INR 15 and the price of a tape is INR 10. To maximize her utility, Reeta should

increase her consumption of compact discs

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Increase her consumption of tapes

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not change her consumption of compact discs and tapes

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lower the price of a tape

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Solution

The correct option is C not change her consumption of compact discs and tapes
$M C_{C D s} / P_{C D s} = M U_{t a p e} / P_{t a p e}$ . Reeta is already maximizing her utility.

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(T U)

9

20

10

15

10 t h

- X

- X = 50

M U_{M} = 10

- X

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