Refer to Table 11W.1 and suppose the price of new product C is $2 instead of $4. How does this affect the optimal combination of products A, B, and C for the person represented by the data? Explain: “The success of a new product depends not only on its marginal utility but also on its price.” TABLE 11W.1 Utility Maximization with the Introduction of a New Product (Income = $10)*(2)Product A: Price = $1(3)(4)Product B: Price = $2New Product C: Price = $4(Б)Marginal Utility(b)Marginal Utility(b)Marginal Utility(1)Unit of(a)MarginalUtility, Utils10(а)MarginalUtility, Utils(a)MarginalUtility, Utilsper Dollar(MU/Price)per Dollar(MU/Price)per DollarProduct(MU/Price)First1024125213Second8820104812Third71844Fourth16836Fifth55126328*It is assumed in this table that the amount of marginal utility received from additional units of each of the three products is independent of the quantity purchased of the otherproducts. For example, the marginal-utility schedule for product C is independent of the amount of A and B purchased by the consumer.

Optimal combination of goods: It refers to the that combination of goods and services which provide…

Answered: TABLE 11W.1 Utility Maximization with…

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to Table 11W.1 and suppose the price of new product C is $2 instead of $4. How does this affect the optimal combination of products A, B, and C for the person represented by the data? Explain: “The success of a new product depends not only on its marginal utility but also on its price.”

TABLE 11W.1 Utility Maximization with the Introduction of a New Product (Income = $10)*
(2)
Product A: Price = $1
(3)
(4)
Product B: Price = $2
New Product C: Price = $4
(Б)
Marginal Utility
(b)
Marginal Utility
(b)
Marginal Utility
(1)
Unit of
(a)
Marginal
Utility, Utils
10
(а)
Marginal
Utility, Utils
(a)
Marginal
Utility, Utils
per Dollar
(MU/Price)
per Dollar
(MU/Price)
per Dollar
Product
(MU/Price)
First
10
24
12
52
13
Second
8
8
20
10
48
12
Third
7
18
44
Fourth
16
8
36
Fifth
5
5
12
6
32
8
*It is assumed in this table that the amount of marginal utility received from additional units of each of the three products is independent of the quantity purchased of the other
products. For example, the marginal-utility schedule for product C is independent of the amount of A and B purchased by the consumer.

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