Chapter 23 Homework 8 Suppose the initial distribution of $4,500 worth of income

Question

Chapter 23 Homework 8 Suppose the initial distribution of $4,500 worth of income is such that Amy receives $1,250 and Bryce receives $3.250 If income is redistributed so that both Amy and Bryce split the $4,500 equally, determine by how much the total utility for each of them changes. The following graphs show how this affects their marginal utilities Amys Marginal Utility of Inoome Bryce's Marginal Ubility of Income points 6,000 6000 5,000 5,000 eBook Print 1,000 1,000 1.0 s2.0 $1,000 $2.000 $3,000 $4000 $5,000 $6,000 1,000 $2.000 $30OO 34000 35.000 36.000 , Army's total utility would | (Click to select) by 2.250,000. 1750,000. 1,250,000. 2,750,000. b Bryce's total utility would Click to select) by 1750,000. 500,000. 1,175,00O. 1,275,000 c. Overal, their combined utlity would Click to select) by 1,500,000. 500,000. 750,000

Explanation / Answer

Total utility will decrease by 2250000 , because marginal utility is increase in utility coming from additional increase in income. Total utility will increase by 1000000 , because marginal utility is increase in utility coming from additional increase in income.

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