THE INFORMATION BELOW PROVIDES PRICE AND MARGINAL UTILITY DATA FOR EACH Of THE PRODUCTS SHOWN UNIT NUMBER 1 2 3 4 5 No. of units of this item GOOD A $10 EACH M.U. bought Marginal Utility of the last unit 50 40 28 14 -2 bought MU/P for the last unit bought Overall Total Utility GOOD B $8 EACH M.U. 40 35 30 25 20 Good A GOOD C $15 EACH M.U. 30 20 10 0 -10 Assume the consumer has $70 to spend, and assume that he/she wants to achieve maximum satisfaction (maximum utility) by purchasing the best possible set of good A through E. Assume all or nearly all of the $70 is to be spent. Determine the number of units of Good A which will be bought (if any), the number of units of Good B (if any), etc. Also calculate the total utility (overall) that will be achieved in the end, and fill in the other information asked for below. Good B Recall that the conditions: MUa/Pa = MUB/Pb = etc. will be satisfied (as nearly as possible) for maximum utility to be reached (where MUa is the marginal utility for the last unit of good "a" and Pa is the price of good "a". GOOD D $6 M.U. 25 21 18 10 3 Good C GOOD E $2 M.U. 15 10 6 3 0 Good D Good E
THE INFORMATION BELOW PROVIDES PRICE AND MARGINAL UTILITY DATA FOR EACH Of THE PRODUCTS SHOWN UNIT NUMBER 1 2 3 4 5 No. of units of this item GOOD A $10 EACH M.U. bought Marginal Utility of the last unit 50 40 28 14 -2 bought MU/P for the last unit bought Overall Total Utility GOOD B $8 EACH M.U. 40 35 30 25 20 Good A GOOD C $15 EACH M.U. 30 20 10 0 -10 Assume the consumer has $70 to spend, and assume that he/she wants to achieve maximum satisfaction (maximum utility) by purchasing the best possible set of good A through E. Assume all or nearly all of the $70 is to be spent. Determine the number of units of Good A which will be bought (if any), the number of units of Good B (if any), etc. Also calculate the total utility (overall) that will be achieved in the end, and fill in the other information asked for below. Good B Recall that the conditions: MUa/Pa = MUB/Pb = etc. will be satisfied (as nearly as possible) for maximum utility to be reached (where MUa is the marginal utility for the last unit of good "a" and Pa is the price of good "a". GOOD D $6 M.U. 25 21 18 10 3 Good C GOOD E $2 M.U. 15 10 6 3 0 Good D Good E
Chapter21: Demand: Consumer Choic
Section: Chapter Questions
Problem 1E
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