The table below shows the marginal utilities in utils that Sarah derives from consuming two goods, snacks, and movies. Quantity of Snacks Marginal Utility of Snacks Quantity of Movies Marginal Utility of Movies 0 - 0 - 1 20 1 50 2 18 2 35 3 15 3 24 4 12 4 20 5 10 5 15 6 8 6 10 Sarah has a limited weekly income of $50, and she spends it all on snacks and movies. Assume the price of snacks is $5 per unit, the price of a movie ticket is $10, and Sarah is a utility-maximizing consumer. (a) Would Sarah be able to consume 3 snacks and 5 movies? Explain. (b) How many snacks and movies will Sarah consume to maximize her utility? Explain. (c) Calculate the total utility Sarah will receive from consuming the utility-maximizing combination of snacks and movies indicated in your answer in part (a). Show your work. (d) Suppose Sarah’s income increases to $60. (i) What will happen to the marginal utility per dollar spent on movies? (ii) Will Sarah be better off buying two more snacks or one more movie ticket? Explain
The table below shows the marginal utilities in utils that Sarah derives from consuming two goods, snacks, and movies.
| Quantity of Snacks | Quantity of Movies | Marginal Utility of Movies | |
|---|---|---|---|
| 0 | - | 0 | - |
| 1 | 20 | 1 | 50 |
| 2 | 18 | 2 | 35 |
| 3 | 15 | 3 | 24 |
| 4 | 12 | 4 | 20 |
| 5 | 10 | 5 | 15 |
| 6 | 8 | 6 | 10 |
Sarah has a limited weekly income of $50, and she spends it all on snacks and movies. Assume the price of snacks is $5 per unit, the price of a movie ticket is $10, and Sarah is a utility-maximizing consumer.
(a) Would Sarah be able to consume 3 snacks and 5 movies? Explain.
(b) How many snacks and movies will Sarah consume to maximize her utility? Explain.
(c) Calculate the total utility Sarah will receive from consuming the utility-maximizing combination of snacks and movies indicated in your answer in part (a). Show your work.
(d) Suppose Sarah’s income increases to $60.
(i) What will happen to the marginal utility per dollar spent on movies?
(ii) Will Sarah be better off buying two more snacks or one more movie ticket? Explain.
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