Answered: a) Fill in the missing numbers b) If…

a) Fill in the missing numbers b) If income is 24, what is the utility maximizing combination? c) If income increases to 60, what is the new utility maximizing combination?

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 1.3P

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Concept explainers

Unemployment and Cost of Unemployment

Unemployment is the state of being unemployed, even when an individual is actively seeking work opportunities. The unemployment rate refers to the percentage of the workforce that is currently unemployed.

Question

Picture is attatched.

Consider the following table. The price of steak dinners is 16. The price of fast food dinners is
4.
Total utility
MU/P
Total Utility MU
F.Food
MU
MU/P
Q
F.Food
Steak Steak
Steak
Steak
Fast Food
F.Food
---
1
48
3
1
16
4
2.5
28
3
120
3
4
24
4
1
5
1
5
42
0.5
6.
43
0.25
a) Fill in the missing numbers
b) If income is 24, what is the utility maximizing combination?
c) If income increases to 60, what is the new utility maximizing combination?
d) How did you arrive at your answer for parts b and c?
e) Suppose income was 40. Compared to your answer in part b, should the consumer buy one
more steak dinner or four more fast food dinners?
f) Why does the utility maximizing rule from pages 139-140 not work exactly here?

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