Assume that an individual consumes two goods, X and Y. The totalutility (assumed

Question

Assume that an individual consumes two goods, X and Y. The totalutility (assumed measurable) of each good is independent of therate of consumption of other good. The price of X and Y arerespectively $40 and $60. Use the following total utilities of Xand Y to answer the following questions:

units of goods       total utility ofX              total utility of Y
1                          20                                 45
2                          38                                 78
3                          54                                 108
4                          68                                 135
5                          80                                 159
6                          90                                 180


a. The marginal utility of the fifth unit of Y is ______

b. The marginal utility of the sixth unit of X is ______

c. The marginal utility per dollar spent on the forth unit ofX is _____

d. The marginal utility per dollar spend on the third unit ofY is_______

Thanks forward for anyone that will attempt to answer thisquestion,

Lifesaver points will be given

Explanation / Answer

In economics Marginal means "from the last consumed unit". Marginal benefit is the benefit gained from the consumption of thelast unit, marginal cost is the cost for that same consumption. Thus the marginal cost for good X and good Y is their price. For each unit we consume, it's the price of purchasing it. Marginal utility is the difference in utility from the one level ofconsumption to the next. Marginal utility1 = Total utility1 - totalutility0 a. The marginal utility for 5th unit of X is the increase inUtility for moving from 4 to 5 units. Total Benefit at 5=80 - Total Benefit at 4=68, Marginal benefit=12 b. With the same thinking, the marginal utility for the 6th unit ofX is: the Total benefit at 6=90 - Total benefit at 5=80, marginal benefit=10 The per dollar, is just the marginal benefit divided by marginalcost. We know marginal cost of X is 40 and the marginal costof Y is 60 for all levels of consumption Thus we find the desired marginal benefit for the 4th unit of X(68-54=14) and the 3rd unit of Y (108-78=30) c. Thus this is 14/40 = 0.35 d. this is 30/60 = 0.5 Hope this helps!

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.