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Solution Library
Marginal Utility And Total Utility Of Two Products
Question
Amy is shopping at a dollar store. She is currently buying 5 bracelets that cost $1 each and 4 sodas that cost $1 each. The table below indicates the marginal utility she obtains when she purchases this combination.
|
|
Quantity |
Price per Unit |
MU per unit |
|
Bracelets |
5 |
$1 |
30 |
|
Sodas |
4 |
$1 |
40 |
- A consumer maximizes utility when the last dollar spent on any good generates the same satisfaction as the last dollar spent on every other good. Is this consumer maximizing her utility?
- If not, should she consume more bracelets or more sodas? Explain.
Answer the following assuming that one more bracelet is purchased and one less soda is consumed:
- Recall the law of diminishing marginal utility. What happens to the Marginal Utility of bracelets and the Marginal Utility of soda?
- What happens to the Total Utility received?
- What happens to the total dollars spent?
Summary
The question belongs to Economics and it discusses about marginal utility and total utility of bracelets and sodas.
Total Word Count 241
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