Use the above completed table to answer the folloiwng questions. a. If your budget is $5.00 and both cookies and pretxels cost $1.00 each, how many cookies and pretzels will you buy to maximize your utility? What willl your total utility be?
Use the above completed table to answer the folloiwng questions. a. If your budget is $5.00 and both cookies and pretxels cost $1.00 each, how many cookies and pretzels will you buy to maximize your utility? What willl your total utility be?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:Name:
Maximizing Utility
The following table shows represents the utility received by Sharon for cookies and pretzels.
Fill in the missing data.
Total Marginal
Utility Utility
# of
pretzels
# of
Marginal
Utility Utility
Total
cookies
---
---
1
20
1
12
2
10
2
8
3
5
3
4
4
4
5
32
5
20
28
-10
Use the above completed table to answer the folloiwng questions.
If your budget is $ 5.00 and both cookies and pretxels cost $1.00 each,
how many cookies and pretzels will you buy to maximize your utility?
а.
What will your total utility be?
Expert Solution
Step 1
Total utility is the utility derived by the consumption of the goods.
Marginal utility is the additional utility derived from the consumption of one extra unit of the good.
MU=TUn-TUn-1
Given information
M=5
P1=1
P2=1
The budget constraints should be
M=P1X1+P2X
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