1= Assume an individual has 20 birr to spend on two products: X1 and X2 each with market price of 2(two) birr. If the total utility the consumer generates from the two products is as given on the table below,

Question

1.1= Select all combinations of X1 and X2 that fulfill the necessary conditions of consumer equilibrium, and from them identify the consumer’s equilibrium purchase size (2pts).
Q 1 2 3 4 5 6 7 8 9 10 11
TUX1 16 30 41 51 60 68 75 81 86 89 90
TUX2 15 28 40 48 54 59 63 66 68 69 69

Answer 1

Combinations of X1 and X2 that fulfill the necessary conditions of consumer equilibrium:
Q1: X1=2, X2=18
Q2: X1=4, X2=16
Q3: X1=6, X2=14
Q4: X1=8, X2=12
Q5: X1=10, X2=10
Q6: X1=12, X2=8
Q7: X1=14, X2=6
Q8: X1=16, X2=4
Q9: X1=18, X2=2

The consumer’s equilibrium purchase size is X1=10 and X2=10.