The table below shows the amounts of additional satisfaction which a consumer wo
ID: 1219160 • Letter: T
Question
The table below shows the amounts of additional satisfaction which a consumer would get from successive quantities of products Marha and Nem.
Units of Marha
MUm
Units of Nem
MUn
1
56
1
32
2
48
2
28
3
32
3
24
4
24
4
20
5
20
5
12
6
16
6
10
7
12
7
8
8
8
8
6
Refer to the above data. If the consumer has a money income of $52 and the prices of Marha is $8 and the price of Nem is $4, the consumer will maximize her utility by purchasing: ____ units of Marha and ____ units of Nem.
b.What level of total utility is realized from the equilibrium combination of Marha and Nem?
Units of Marha
MUm
Units of Nem
MUn
1
56
1
32
2
48
2
28
3
32
3
24
4
24
4
20
5
20
5
12
6
16
6
10
7
12
7
8
8
8
8
6
Explanation / Answer
The utility maximising condition require that, Px/Py = MUx/MUy.
Where Px and MUx are the price and marginal utility of good X. And Py and MUy are the price and marginal utility of good Y.
Pm/Pn = 8/4 = 2.
So the ratio of MUm/MUn = Pm/Pn should be equal to 2.
This is at 1 unit of Marha and 1 unit of Nem (MUm/MUn is 1.75,closest to 2 of all ratios).
b. Marginal utility is = change in total utility/change in units consumed.
At 1 units of Marha, 56 = change inTU/1.
Change in TU = 56*1 = 56.
Similarly, change in TU of 1 unit of Nem = 32*1 = 32.
Mum/Mun 1.75 1.71 1.33 1.20 1.67 1.60 1.50 1.33Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.