eastte Budget Constraint: Muffin $1 Consumed Donut $1 MU MU 60 50 40 30 20 30 20
ID: 1154055 • Letter: E
Question
eastte Budget Constraint: Muffin $1 Consumed Donut $1 MU MU 60 50 40 30 20 30 20 10 To Maximize Utility, the consumer should purchase: Muffins and Donuts Total Utility with this combination is: The Marginal Utility to Price Ratio for the last muffin purchased is: The Marginal Utility to Price Ratio for the last donut purchased is Note: Price of Muffins are Increased from S1 to $2 Maximizing Consumer Utility Budget Constraint: $7 Muffin $2 Consumed Donut $1 Consumed MU MU 1 60 2 50 3 40 4 30 5 20 30 20 10 To Maximize Utility, the consumer should purchase: Muffins andDonutsExplanation / Answer
Answer 1 : Budget constraint = $7
To maximise the utility, consumer should purchase 3 muffins and 4 donuts.
Total utility combination is 60.
The marginal utility of price ratio for last muffins purchased = 20/1 =20
The marginal utility of price ratio for last donut purchased = 10/1 =10
Answer 2 : Budget constraint =$7
To maximise the utility, consumer should purchased 3 muffins aand 2 donuts.
Total utility of combination = 90
MU of price ratio for last muffins purchased =20/2 =10
MU of price ratio for last donuts purchased =10/1 =10
Answer 3 : Budget constraint = $7
To maximise the utility, the consumer should purchased
3 muffins and 2 donuts
Total utility with combination is 80
MU of the price ratio for last muffins purchased = 20/1= 20
MU of the price ratio for last donuts purchased = 10/2 =5
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