1. (s Points: 2+2+1] The table below shows the total utility (TU) schedules f 1
ID: 1110828 • Letter: 1
Question
1. (s Points: 2+2+1] The table below shows the total utility (TU) schedules f 1 per bottle). Answer the following Price of Dhs 2 per Piece) and Pepsi (Price of Dhs questions (a to c) given a budget (income) of 20 AED. MU" for TU for MU' for TU for Quantity Mini-PizzaMini-Pizza Pepsi Pepsi 50 90 122 148 170 190 30 50 62 72 80 87 MU refers to marginal utsity a. Fill in the marginal utility (MU) columns in the above table. (SHOW YOUR WORK OuT b. How many pieces of Mini-pizzas and bottles of Pepsis will maximize the consumer's utility? And what is the maximum utility? c. What is the total utility of consuming 2 bottles of Pepsi and 5 pieces of Mini-pizzas?Explanation / Answer
(a)
(b)
The utility maximisation of two goods condition;
MUx/Px = MUy/Py
As it can be seen that (MU of Mini pizza/price of a mini pizza ) are (MU of Pepsi/ price of Pepsi ) are equal at the quantity of 2 units.
It means 2 units of mini pizza and 2 units of Pepsi will maximize consumer utility.
Maximum utility = TU of 2 units of mini pizza + TU of 2 units of Pepsi
= 90 +50
=140 utils
(c)
Total utility of consuming 2 bottles of Pepsi and 5 Mini pizza
= TU of 5 units of mini pizza + TU of 2 bottles of Pepsi
=170+50
=220 utils
Total utility of consuming 2 bottles of Pepsi and 5 Mini pizza is 220 utils
Q TU for mini-pizza MU for mini-pizza MU/P=2 TU of pepsi MU of pepsi MU/p=1 1 50 50-0=50 50/2=25 30 30-0=30 30/1=30 2 90 90-50=40 40/2=20 50 50-30=20 20/1=20 3 122 122-90=32 32/2=16 62 62-50=12 12/1=12 4 148 148-122=26 26/2=13 72 72-62=10 10/1=10 5 170 170-148=22 22/2=11 80 80-72=8 8/1=8 6 190 190-170=20 20/2=10 87 87-80=7 7/1=7Related Questions
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