Exploring Economics
8th Edition
ISBN: 9781544363356
Author: Robert L. Sexton
Publisher: Sage Publications
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Question
Chapter 10, Problem 7P
To determine
The relocation of fixed income when the
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How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double?
All goods have diminishing marginal utility, but for some goods (or activities), marginal utility falls quickly as you consume more, while for others, marginal utility falls slowly. Can you think of examples of goods that you continue to enjoy a great deal as your consumption increases? Can you think of goods for which your marginal utility decreases rapidly?
Suppose you consume 3 pounds of beef and 5 pounds of pork per month. The price of beef is $1.50 per pound, and pork is $3.00 per
pound.
Assuming you have studied economics and achieved consumer equilibrium, the ratio of your marginal utility of beef to your marginal utility of pork is
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- c) From the following budget line and the utility function, calculate the amount of two commodities that maximizes satisfaction. What is the maximum amount of satisfaction? 2500= 20X + 30Y U = 300 X0.6Y0.7arrow_forwardSuppose it is “All You Can Eat” Night at your favorite restaurant. Once you’ve paid $69.95 for your meal, how do you determine how many helpings to consume? Should you continue eating until your food consumption has yielded $69.95 worth of satisfaction? What happens to the marginal utility from successive helpings as consumption increases?arrow_forwardYou are choosing between two goods, X and Y, and your marginal utility from each is as shown in the following table. If your income is $9 and the prices of X and Y are $2 and $1, respectively, what quantities of each will you purchase to maximize utility? What total utility will you realize? Assume that, other things remaining unchanged, the price of X falls to $1. What quantities of X and Y will you now purchase? Using the two prices and quantities for X, derive a demand schedule (a table showing prices and quantities demanded) for X.arrow_forward
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