A. Utility Theory 1. Economists observe the more pleasure a product provides, the higher the price we're willing to pay for it. 2. Total vs. Marginal Utility (Table 5.1 and Figure 5.2) • Definition: Utility The pleasure or - satisfaction obtained from a good or service. • There is an important distinction between total utility and marginal utility: • Definition: Total Utility - The amount of satisfaction obtained from entire • consumption of a product. Definition: Marginal Utility - The change in total utility obtained by consuming one additional (marginal) unit of a good or service.

A. Utility Theory 1. Economists observe the more pleasure a product provides, the higher the price we're willing to pay for it. 2. Total vs. Marginal Utility (Table 5.1 and Figure 5.2) • Definition: Utility The pleasure or - satisfaction obtained from a good or service. • There is an important distinction between total utility and marginal utility: • Definition: Total Utility - The amount of satisfaction obtained from entire • consumption of a product. Definition: Marginal Utility - The change in total utility obtained by consuming one additional (marginal) unit of a good or service.

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 3SQP

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Similar questions

Take Jeremys total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremys utility.
Is it possible for total utility to increase while marginal utility diminishes? Explain.
Jeremy is deeply in love with Jasmine. Jasmine lives where cell phone coverage is poor, so he can either call her on the land-line phone for five cents per minute or he can drive to see her, at a roundâ€”trip cost of 2 in gasoline money. He has a total of 10 per week to spend on staying in touch. To make his preferred choice, Jeremy uses a handy utilimometer that measures his total utility from personal visits and from phone minutes. Using the values in Table 6.6, figure out the points 011 Jeremys consumption choice budget constraint (it may be helpful to do a sketch) and identify his utility-maximizing point.
Would you expect total utility to rise or fall with additional consumption of a good? Why?
If people do not have a complete mental picture of total utility for every level of consumption, how can they find their utility-maximizing consumption choice?
1. What is the Total Utility of the second unit? 2. What is the Marginal utility of the third, fourth and the fifth unit? 3. Explain the relationship between Total Utility and Marginal Utility. 4. At which rate is total utility increasing: a constant rate, a decreasing rate, or an increasing rate? How do you know? 5. “It is possible that a rational consumer will not purchase any units of the product represented by these data.” Do you agree? Explain why or why not. 6. In the last decade or so there has been a dramatic expansion of small retail convenience stores (such as 7 Eleven, Kwik Shop, and Circle K), although their prices are generally much higher than prices in large supermarkets. What explains the success of the convenience stores?
b. The table below shows the total utility associated with the consumption of units of ice cream. Fill in the table by finding the marginal utility for each row: a=35 b- 17.5 <= 10.5 d-8.75 e= -7 Show hint Quantity Total Utility Merginal Utility 1 Does this problem demonierate diminishing marginal utility? A. No B. Yes 2 3 4 5 6 160 195 2125 223 231.75 238.75 4 b C d
Question 9
What is the total utility at 4 units and the marginal utility when Jack goes from consuming three pop tarts to four pop tarts? Quantity Marginal Utility 1 20 2 15 3 10 4 5 5 0 6 -5 Question 44 options: a) Total utility = 50 ; Marginal Utility = 5 b) Total utility = 45 ; Marginal Utility = 10 c) Total utility = 45 ; Marginal Utility = 5 d) Total utility = 50 ; Marginal Utility = 10
DmISIIng Margifal Otmty n. TOTAL AND MARGINAL UTILITY Reset E UTILITY CALCULATIONS Total Utility Quantity Consumed Total Marginal Utility 70 Utility 60 50 22 40 1 22 30 18 20 40 10 14 2 3 4 54 Quantity Consumed 10 Marginal Utility 4 64 20 6. 10 70 3. 6. -10 6. 72 -20 -2 7 70 Quantity Consumed Quantity Consumed -6 8. 64 8 Prev 1 of 3 Score answer > ...
Total Utility Total Utility 0 0 15 25 30 35 40 43 48 46 5 55 5 48 Refer to Table 6-3. The table shows Moira's total utility from each chocolate bar and cup of hot chocolate that she consumes. Which cup of hot chocolate has the highest marginal utility? the first the second the fourth the fifth Quantity 0 1 2 3 4 Quantity 0 1 3
Name: Maximizing Utility The following table shows represents the utility received by Sharon for cookies and pretzels. Fill in the missing data. Total Marginal Utility Utility # of pretzels # of Marginal Utility Utility Total cookies --- --- 1 20 1 12 2 10 2 8 3 5 3 4 4 4 5 32 5 20 28 -10 Use the above completed table to answer the folloiwng questions. If your budget is $ 5.00 and both cookies and pretxels cost $1.00 each, how many cookies and pretzels will you buy to maximize your utility? а. What will your total utility be?