Chapter 5 Problem 1 Assume that an individual consumes two goods, X and Y. The t

Question

Chapter 5 Problem 1 Assume that an individual consumes two goods, X and Y. The total utility of each good is independent of the rate of consumption of the other good. The price of X and Y are $40 and $60 respectively. Use the following table of total utilities to answer the following questions. Good Total Utility of X 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 fourth unit of Y is __________. b. The marginal utility of the fifth unit of X is ___________. c. The marginal utility per dollar spent on the third unit of X is __________. d. The marginal utility per dollar spent on the second unit of Y is __________. e. If the consumer has $420 to spend, ______ unit of X and _______ units of Y maximize utility subject to the budget constraint. Explain. f. If the consumer has $220 to spend, _______ units of X and _______ units of Y maximize utility subject to the budget constraint. Explain.

Explanation / Answer

price of X =40 price of Y =60 a>135-108 = 27 b>80-68 =12 c>(38-20)/40 =18/40=0.45 d>(78-45)/60=0.55 e>6 , 3 f>4,2 they will buy the units inorder to get the maximum utility of all the compbinations these are the maximum combos cheers :)

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