Exercise 1: If you know that Hind has a weekly income of 52 riyals and can spend the entire income on only two items: oranges and apples, with the price of oranges being 6 riyals and the price of apples being 2 riyals, based on the data provided in the following table, clarify the following: 1- What are the conditions for maximizing utility? 2- How can you achieve those conditions? Marginal Utility of Apples/Price 32 30 25 19 17 14 13 10 9 8 Marginal Utility of Oranges/Price 20 18 16 14 12 10 8 6 5 4 Number of Units Consumed 1 2 3 4 5 6 7 8 9 10
Exercise 1: If you know that Hind has a weekly income of 52 riyals and can spend the entire income on only two items: oranges and apples, with the price of oranges being 6 riyals and the price of apples being 2 riyals, based on the data provided in the following table, clarify the following: 1- What are the conditions for maximizing utility? 2- How can you achieve those conditions? Marginal Utility of Apples/Price 32 30 25 19 17 14 13 10 9 8 Marginal Utility of Oranges/Price 20 18 16 14 12 10 8 6 5 4 Number of Units Consumed 1 2 3 4 5 6 7 8 9 10
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Exercise 1: If you know that Hind has a weekly income of 52 riyals and can spend
the entire income on only two items: oranges and apples, with the price of
oranges being 6 riyals and the price of apples being 2 riyals, based on the data
provided in the following table, clarify the following:
1- What are the conditions for maximizing utility?
2- How can you achieve those conditions?
Marginal Utility of
Apples / Price
32
30
25
19
17
14
13
10
9
8
Marginal Utility of
Oranges/Price
20
18
16
14
12
10
8
6
5
4
Number of Units
Consumed
1
2
3
4
5
6
7
8
9
10
Expert Solution
Step 1: Introduce the problem and present initial data
The problem focuses on identifying the optimal conditions for maximizing the utility for the person. It happens when a person consumes goods based on the ratio of marginal utility per dollar spent ( or other currency spent). It helps maximize the utility.
The initial data are:
The price of oranges = 6 riyals
The price of Apples = 2 riyals
The available income = 52 riyals
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