A consumer finds only three products, X, Y, and Z, are for sale. The amount of utility yielded by their consumption is shown in the table below. Assume that the prices of X, Y, and Z are $10, $2, and $8, respectively, and that the consumer has an income of $74 to spend. (a) Complete the following table by computing the marginal utility per dollar for successive units of X, Y, and Z to one or two decimal places. (b) How many units of X, Y, and Z will the consumer buy when maximizing utility and spending all income? Show this result using the utility maximization formula. (c) Why would the consumer not be maximizing utility by purchasing 2 units of X, 4 units of Y, and 1 unit of Z? Product X Product Y Quantity Utility Marginal Quantity Utility Marginal Utility Utility per$ per$ 1 23 4567 42 82 118 148 170 182 182 1 23 4 5 6 7 14 26 36 44 50 54 56.4 Product Z Quantity Utility Marginal Utility per$ 1 23456 7 32 60 84 100 110 116 120 3..

A consumer finds only three products, X, Y, and Z, are for sale. The amount of utility yielded by their consumption is shown in the table below. Assume that the prices of X, Y, and Z are $10, $2, and $8, respectively, and that the consumer has an income of $74 to spend. (a) Complete the following table by computing the marginal utility per dollar for successive units of X, Y, and Z to one or two decimal places. (b) How many units of X, Y, and Z will the consumer buy when maximizing utility and spending all income? Show this result using the utility maximization formula. (c) Why would the consumer not be maximizing utility by purchasing 2 units of X, 4 units of Y, and 1 unit of Z? Product X Product Y Quantity Utility Marginal Quantity Utility Marginal Utility Utility per$ per$ 1 23 4567 42 82 118 148 170 182 182 1 23 4 5 6 7 14 26 36 44 50 54 56.4 Product Z Quantity Utility Marginal Utility per$ 1 23456 7 32 60 84 100 110 116 120 3..

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A consumer finds only three products, X, Y, and Z, are for sale. The amount of utility yielded by their consumption
is shown in the table below. Assume that the prices of X, Y, and Z are $10, $2, and $8, respectively, and that the
consumer has an income of $74 to spend.
(a) Complete the following table by computing the marginal utility per dollar for successive units of X, Y, and Z to
one or two decimal places.
(b) How many units of X, Y, and Z will the consumer buy when maximizing utility and spending all income? Show
this result using the utility maximization formula.
(c) Why would the consumer not be maximizing utility by purchasing 2 units of X, 4 units of Y, and 1 unit of Z?
Product
X
Product
Y
Quantity Utility Marginal Quantity Utility Marginal
Utility
Utility
per$
per$
1
23
4567
42
82
118
148
170
182
182
1
23
4
5
6
7
14
26
36
44
50
54
56.4
Product
Z
Quantity Utility Marginal
Utility
per$
1
23456
7
32
60
84
100
110
116
120
3..

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3. Consider the following utility function: U = 5 x1 + 2 x2 Also consider the following bundles: A=(6, 6) B=(8, 4) C=(4,11) D=(7, 9) E=(9, 3) If x1=20, how much of x2 does the consumer has to consume to obtain a utility level of 150? 50 300 170 25
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