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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The data presented in Table 1 below has the utility function schedule of an individual with an income of $500. The individual’s objective is to maximise utility when consuming two products – Rice and Legumes. Do the following a. Derive the Total Utility schedule for Legumes and the Marginal Utility schedule for Rice. b. Determine the equilibrium consumption of Legumes and Rice before the price change in Legumes c. Determine the equilibrium consumption of Legumes and Rice after the price change in Legumes d. Derive the demand curve for Legumes Units Consumed Legumes ($100) New Price of Legumes ($50.00) Rice ($50.00) TU MU MU/P MU/P* TU MU MU/P 0 0 0 0 1 1200 500 2 1000 900 3 900 1250 4 800 1550 5 600 1800 6 300 2000 7 200 2150
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