ECON 1100 Lecture Notes - Lecture 12: Toffee, Cashew, Marginal Utility

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uwinstudent1122

4 Sep 2019

School

University of Windsor

Department

Economics

Course

ECON 1100

Professor

Dr.Michael Batu

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Document Summary

Marginal utility for cashew / price of cashew. Let"s find candidate combinations of toffee and cashews (summary table from previous two tables) Mu / price of toffee mu/ price of cashew. Criteria 1: mu/price of toffee = mu/price of cashew. Criteria 2: requires that the consumer should be on budget. Candidate 1: buy 6 toffee and 2 cashew = 6(1) + 2(5) = 16. Candidate 2: buy 7 toffee and 4 cashew = 7(1) + 4(5) = 27. Therefore, 6 toffee and 2 cashew is an inferior combination (16$ not equal 27$). The consumer can improve by using all of his/her income. In conclusion, the consumer should purchase 7 units of toffee and 4 units of cashew to maximize their utility subject to the consumers limited income of 27$, and subject to the prices of the two goods, toffee and cashews. So far, we assumed that prices of toffee and cashew are fixed.

Related Questions

12 The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a l-week period. Toffee (bars) Cashews (bags) Total Total Units Marginal Utility Utility Marginal Utility Utility 10 10 28 18 10 22 35 23 29 26 5 2 6 0 37 17 0 27 | 0 | 27 TABLE 6-1 18) Refer to Table 6-1. If the prices of toffee bars and bags of cashews are both $1 and this consumer has $7 per week to spend on these two snacks, how many of each will he/she purchase to maximize utility? A) 2 toffee bars and 5 bags of cashews B) 3 toffee bars and 4 bags of cashews C) 4 toffee bars and 3 bags of cashews D) 5 toffee bars and 2 bags of cashews E) 6 toffee bars and 1 bag of cashews

Find the utility-maximizationcombination of movies and books with the following data.
Price of movie = $4; Price of Book=$2; Income=$20

Quantity	Marginal Utility
	Movies	Books
1	54	24
2	48	18
3	42	14
4	36	10
5	33	6
6	27	4
7	18	2

tealelephant71

PLEASE FIND SOLUTIONS TO WHERE QUESTION MARKS ARE INDICATED AND SOLVE THE FORMULA AT BOTTOM

Columns 1 through 4 in the accompanying table show the marginal utility, measured in utils, that Ricardo would get by purchasing various amounts of products A, B, C, and D. Column 5 shows the marginal utility Ricardo gets from saving. Assume that the price of good A is $9.00, the price of good B is $3.00, the price of good C is $2.00 and the price of good D is $12.00. Ricardo's income is $53.00.

Column 1		Column 2		Column 3		Column 4		Column 5
Units of Good A	MU	Units of Good B	MU	Units of Good C	MU	Units of Good D	MU	Number of Dollars Saved	MU
1	72	1	24	1	15	1	36	1	5.00
2	54	2	15	2	12	2	30	2	4.00
3	45	3	12	3	8	3	24	3	3.00
4	36	4	9	4	7	4	18	4	2.00
5	27	5	7	5	5	5	13	5	1.00
6	18	6	5	6	4	6	7	6	0.50
7	15	7	2	7	3.5	7	4	7	0.25
8	12	8	1	8	3	8	2	8	0.13

What quantities of A, B, C, and D will Ricardo purchase in maximizing his utility?
Price of good A: $9.00, Units of A: ????
Price of good B: $3.00, Units of B: ?????
Price of good C: $2.00, Units of C: ????
Price of good D: $12.00, Units of D: ????

b. How many dollars will Ricardo choose to save? $?????

c. Check your answers by substituting them into the algebraic statement of the utility-maximizing rule.

( $ Ã ) + ( $ Ã ) + ( $ Ã ) + ( $ Ã ) + $ = $

cyanbee816

ECON 1100 Lecture Notes - Lecture 12: Toffee, Cashew, Marginal Utility

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