2. Bruno, the consumer in Problem 1, is best friends with Ruby who shares Bruno's love for energy bars and smoothies. The accompanying table shows Ruby's utilities from smoothies and energy bars. Quantity of Utility from Quantity of Utility from energy smoothies smoothies (utils) energy bars bars (utils) 0 0 0 0 1 32 2 28 2 52 60 4 60 3 84 6 72 4 104 5 120 8 10 88 88 100 The price of an energy bar is $2, the price of a smoothie is $4, and Ruby has $20 of income to spend. a. Which consumption bundles of energy bars and smoothies can Ruby consume if she spends all her income? Illustrate Ruby's budget line with a diagram, putting smoothies on the horizontal axis and energy bars on the vertical axis. b. Calculate the marginal utility of each energy bar and the marginal utility of each smoothie. Then calculate the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies. c. Draw a diagram like Figure 10-4 in which both the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies are illustrated. Draw the quantity of energy bars increasing from left to right, and the quantity of smoothies increasing from right to left. Using this diagram and the utility-maximizing principle of marginal analysis, predict which bundle — from all the bundles on her budget line ― Ruby will choose. - - 3. For each of the following situations, decide whether the bundle Lakshani is considering is optimal or not. If it is not optimal, how could Lakshani improve her overall level of utility? That is, determine which good she
2. Bruno, the consumer in Problem 1, is best friends with Ruby who shares Bruno's love for energy bars and smoothies. The accompanying table shows Ruby's utilities from smoothies and energy bars. Quantity of Utility from Quantity of Utility from energy smoothies smoothies (utils) energy bars bars (utils) 0 0 0 0 1 32 2 28 2 52 60 4 60 3 84 6 72 4 104 5 120 8 10 88 88 100 The price of an energy bar is $2, the price of a smoothie is $4, and Ruby has $20 of income to spend. a. Which consumption bundles of energy bars and smoothies can Ruby consume if she spends all her income? Illustrate Ruby's budget line with a diagram, putting smoothies on the horizontal axis and energy bars on the vertical axis. b. Calculate the marginal utility of each energy bar and the marginal utility of each smoothie. Then calculate the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies. c. Draw a diagram like Figure 10-4 in which both the marginal utility per dollar spent on energy bars and the marginal utility per dollar spent on smoothies are illustrated. Draw the quantity of energy bars increasing from left to right, and the quantity of smoothies increasing from right to left. Using this diagram and the utility-maximizing principle of marginal analysis, predict which bundle — from all the bundles on her budget line ― Ruby will choose. - - 3. For each of the following situations, decide whether the bundle Lakshani is considering is optimal or not. If it is not optimal, how could Lakshani improve her overall level of utility? That is, determine which good she
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter6: Consumer Choices
Section: Chapter Questions
Problem 1SCQ: Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can...
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Transcribed Image Text:2. Bruno, the consumer in Problem 1, is best friends with Ruby who shares
Bruno's love for energy bars and smoothies. The accompanying table shows
Ruby's utilities from smoothies and energy bars.
Quantity of
Utility from
Quantity of
Utility from energy
smoothies
smoothies (utils)
energy bars
bars (utils)
0
0
0
0
1
32
2
28
2
52
60
4
60
3
84
6
72
4
104
5
120
8
10
88
88
100
The price of an energy bar is $2, the price of a smoothie is $4, and Ruby has
$20 of income to spend.
a. Which consumption bundles of energy bars and smoothies can Ruby
consume if she spends all her income? Illustrate Ruby's budget line with
a diagram, putting smoothies on the horizontal axis and energy bars on
the vertical axis.
b. Calculate the marginal utility of each energy bar and the marginal utility
of each smoothie. Then calculate the marginal utility per dollar spent on
energy bars and the marginal utility per dollar spent on smoothies.
c. Draw a diagram like Figure 10-4 in which both the marginal utility per
dollar spent on energy bars and the marginal utility per dollar spent on
smoothies are illustrated. Draw the quantity of energy bars increasing
from left to right, and the quantity of smoothies increasing from right to
left. Using this diagram and the utility-maximizing principle of marginal
analysis, predict which bundle — from all the bundles on her budget line
― Ruby will choose.
-
-
3. For each of the following situations, decide whether the bundle Lakshani is
considering is optimal or not. If it is not optimal, how could Lakshani
improve her overall level of utility? That is, determine which good she
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