Answered: Let attached table be data of goods X1…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Let attached table be data of goods X1 and X2, at a ratio:

Where MU X1 is Marginal Utility for X1 and MU X2 is Marginal Utility for X2

If Price of X1 is $10 and price for X2 is $50 with a total income of $200:

a) Calculate quantities of X1 and X2 who maximize consumer utility

b) If price of X1 rises to $20, ceteris paribus, what would happen with combination that maximizes utility? Calculate. Also, what can we suggest to consumer?

c) If monetary income rises to $230, what will happen now?

Q X1
1
2
3
4
5
MU X1
200
350
300
200
100
QX2
1
2
3
4
5
MU X2
1,000
800
500
300
200

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