uiz action 1700010000Bckom 1509746 198009 AAA6B04015F1989FBAF 190EO000 marginal
ID: 1102998 • Letter: U
Question
uiz action 1700010000Bckom 1509746 198009 AAA6B04015F1989FBAF 190EO000 marginal utity (MU) and margraalty per dolar ()she rwavesfiem thestthroughMth bags of dios she bmeach-ek. Table B showa the same information for granola when the price of a bag of granola (Pa) is her 14 or $2.Aume that Cercine is a raionalcnsumer whe wants maximize her utlty. Table A (Bags) (Ueils) f 2) 30 15 14 Table B Granola HU (age Coni-4)F-2) >410 132 >24 ‘ 16 Ifthe price of a bag of granol, is $4, the price of a bag of chips is $2. aed Caroline wend were budgof$1B, sha wacheose to buy 2 b of chips and Now, suppose that granola goes on sale, and its price decreases to $2. Caroline's unility is now masximiaed i she buys Suppose the price of chips is foxed at $2, and Caroline's budget is foxed at $10 Onthe gaph, use the blue Ine (crede aymbala-gie carele's demand for ganao·mebyakng one we por (ones-oooo, ann demand for granola when the price is $4 and che secand bve point on Careline's demand fer granola when che price is $2. Caroline's DemandExplanation / Answer
If he spends entire income on chips he will get 10/2 = 5 units and will obtain MU = 6. So MU/PC = 3. If he spends his income on granola he will buy 3 units and will obtain MU = 24. So MU/PG = 6. Since MU/PC< MU/PG , he will consume all 3 granola and 0 units of chips.
In this case PG= 2, so MU = 4 . So MU/PG = 2 . Now MU/PC >MU/ PG i.e 3>2 . So he will consume 0 granola and 5 units of chips.
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