Question
The table below shows total utility for two products. Suppose that the price for product A...
The table below shows total utility for two products. Suppose that the price for product A is $5 and the price for product B is $5.
| Number of product A | Total Utility for A | Number of product B | Total Utility for B |
| 0 | 0 | 0 | 0 |
| 1 | 140 | 1 | 180 |
| 2 | 260 | 2 | 340 |
| 3 | 360 | 3 | 460 |
| 4 | 440 | 4 | 520 |
| 5 | 500 | 5 | 540 |
Suppose that a person has $25.
4. How many units of product B should she buy to maximize her happiness given her budget constrain?
Answers
Total budget = 25
Quantity Total utility from A Marginal utility from A Marginal utility per dollar from A (p=5) Total utility from B Marginal utility from B Marginal utility per dollar from b (p=5) 0 0 0 0 0 0 0 1 140 140 28.00 180 180 36.00 2 260 120 24.00 340 160 32.00 3 360 100 20.00 460 120 24.00 4 440 80 16.00 520 60 12.00 5 500 60 12.00 540 20 4.00 Selection for consumption of goods will be decreasing order of MU/Dollar
Total 2 units of A and 3 units of B will be consumed to maximize her utility
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