Class Activity Q1: Complete the following table and answer the questions below: a) Graphically show Law of Diminishing Marginal Utility b) Graphically explain Total Utility and Marginal Utility relationship Quantity TU 1 15 28 3 39 4 48 5 55 60 7 63 64 9. 63 10 61

. TOTAL AND MARGINAL UTILITY E UTILITY CALCULATIONS Reset Total Utility Quantity Consumed Total Marginal Utility 70 Utility 60 50 22 40 1 22 30 18 20 2 40 10 14 3 4 6 8 3 54 Quantity Consumed Marginal Utility 10 20 4 64 6. 10 70 4 6. -10 72 -20 -2 Quantity Consumed 70 Quantity Consumed -6 8 64 2. 4 6 8

Graphical and Intuitive Optimization Consider a consumer who must allocate their available income between the consumption of two goods, Beer and Pizza.  Their preferences over Beer and Pizza adhere to the usual assumptions we have made about preferences. The indifference curve map below reflects their preferences and the budget constraint reflects current income and prices. In the simplest terms possible, define or explain the term "Marginal Utility of Beer" (MUB). In the simplest terms possible, define or explain the term "Marginal Rate of Substitution of beer for pizza" (MRSBP). In the simplest terms possible, intuitively explain the meaning of MUB/PB, where PB represents the price of one unit of Beer.

Units of the Good 0 1 5678AWN2 3 4 Total Utility Total Utility of X of Y 0 0 620 1740 1120 3030 1500 3960 1820 4710 2080 5280 2300 5730 2460 6060 2580 6300 For the next 3 questions, assume that an individual consumes two goods X and Y. The total utility (assumed measurable) of each good is independent of the rate of consumption of other goods. The prices of X and Y are, respectively, $20 and $30. If the consumer buys the fourth unit of X the Marginal Utility per Dollar Spent on X is 16 I If the consumer has $210 to spend on X and Y, the utility-maximizing bundle is The minimum budget necessary to move to a higher equilibrium consumption of X and Y is $ unit(s) of X and unit(s) of Y.