I don't understand the meaning of this sentence. This is the concept that experts say when answering questions. Could you explain that? Why is consumer surplus equal to the utility obtained in consumption? Utility refers to the total amount of satisfaction that derived from the consumption of goods and services. The person's consumer surplus in this case is equal to the utility he derived from the consumption.
I don't understand the meaning of this sentence. This is the concept that experts say when answering questions. Could you explain that? Why is consumer surplus equal to the utility obtained in consumption? Utility refers to the total amount of satisfaction that derived from the consumption of goods and services. The person's consumer surplus in this case is equal to the utility he derived from the consumption.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I don't understand the meaning of this sentence. This is the concept that experts say when answering questions. Could you explain that? Why is
Utility refers to the total amount of satisfaction that derived from the consumption of goods and services. The person's consumer surplus in this case is equal to the utility he derived from the consumption.
Transcribed Image Text:Andrea has a budget of £21 to spend on toothbrushes and tooth paste. He
does not receive any utility from owning a toothbrush, but for the consumption
of every tube of tooth paste he gains a utility of 2 utils – but only if he owns a
tooth brush. Without a tooth brush, Andrea gains no utility from consuming
tooth paste. In addition, after consuming 10 tubes of tooth paste, a toothbrush
needs to be replaced, i.e., Andrea needs to buy a new one. The current price
of tooth brushes on the market is £5 and the current price for tooth paste is £1
per tube. Assume that Andrea aims to maximise consumer surplus.
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a) In a graph, draw total utility as a function of number of toothpaste tubes,
assuming that Andrea buys 1 tooth brush.
b) How many tubes will Andrea buy if he wants to maximise consumer
surplus, assuming that Andrea can buy any amount of tooth brushes?
What is Andrea's total consumer surplus?
c) How many tubes will he buy if the current price is £0.50 per tube?
d) Find Andrea's income-consumption curve for tooth paste tubes for
incomes between £0 and £21, assuming a price of £1 per tube.
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