a) From the graph above, complete columns 2 and 4 of the table above. Round your answers to whole numbers. b) If the price of both products is $1, what quantity of each good would Marshall purchase if his budget was $8?
a) From the graph above, complete columns 2 and 4 of the table above. Round your answers to whole numbers. b) If the price of both products is $1, what quantity of each good would Marshall purchase if his budget was $8?
Chapter4: Utility Maximization And Choice
Section: Chapter Questions
Problem 4.3P
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Transcribed Image Text:S
(1)
Quantity
1
2
3
4
5
6
(2) Product
A MU
(3)
Product A
MU per $
(at $2)
(4)
Product B
MU
a) From the graph above, complete columns 2 and 4 of the table above. Round your answers to whole numbers.
b) If the price of both products is $1, what quantity of each good would Marshall purchase if his budget was $8?
Quantity of A:
Quantity of B:
Quantity of A:
Quantity of B:
c) Suppose that the price of product A increases to $2. Complete column 3 of table above.
d) If Marshall's budget remained the same, what quantities of each good would he now purchase?
Transcribed Image Text:The graph given below indicates Marshall's marginal utility for two products, A and B.
Marginal utility
12
10
8
2
0
2
4
6
Quantity per period
8
Product A
Product B
10
W
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Step 1: Define Marginal utility
VIEWStep 2: (a) Complete the Marginal Product of product A and B
VIEWStep 3: (b) Calculate the optimum bundle at the price of $1 for both products
VIEWStep 4: (c) Compute MU per $ for Product A at price of $2
VIEWStep 5: (d) Compute the new affordable bundle
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