Numbe Total Margina Margina Numbe Total Margina Margina Margina r of ice utility
ID: 1121779 • Letter: N
Question
Numbe Total Margina Margina Numbe Total Margina Margina Margina r of ice utility Iutility I utilityutility utility utility cream from from last per price cans of y from last per price per price cones e ceMU Cola from ClaMU M.U Cola crea IKE CREAM P- $2.00 P-$1.00 P-$2.00 cones 961 120 200 244 280 308 240 280 | 308 324 332 20 6 328 2010 7 340 8 344 8 334 12 ssume that the price of Ice Cream is $2 per cone and the price of cans of Cola is $1 per can. 1) Complete columns (A thru I) of the table above. (5 points) 2) What are all of the possible combinations of Ice Cream and Cola available if your budget constraint is $8.00? (2 points) If your budget constraint remains at $8, what is the utility maximizing Ice Cream and Cola? (4 points) 3) combination of 4) What are all of the possible combinations of Ice Cream and Cola available if your budget constraint is $8.00? (2 points) 5) If your budget constraint remains at $8, what is the utility maximizing combination of Ice Cream and Cola? (4 points)Explanation / Answer
1) Table is completed below. Note that MU = TU for two sucessive output leve
ls.
2) When income is $8, we can afford the following bundles.
2*I + 1*C = 8
(Ice cream cones, Cola) = (1, 1), (1, 2), (1, 3), (1, 4), (1, 5), (1, 6) (2. 1), (2,2) (2, 3), (2, 4), (3, 1) , (3, 2), (4, 0).
3) This will be the one that satisfies MU/$ for both ice cream cones and cola
When ice cream cones are 2 and Cola is 4, MU/$ = 40 FOR BOTH and spending = 2*2 + 4*1 = $8, all income is exhausted. This is required bundle.
4) When income is $8, we can afford the following bundles.
2*I + 1*C = 8
(Ice cream cones, Cola) = (1, 1), (1, 2), (1, 3), (1, 4), (1, 5), (1, 6) (2. 1), (2,2) (2, 3), (2, 4), (3, 1) , (3, 2), (4, 0).
Number TU(Icecream) MU MU/$ TU(Cola) MU MU/$ MU/$ new 0 0 0 1 120 120 60 96 96 96 48 2 200 80 40 176 80 80 40 3 244 44 22 240 64 64 32 4 280 36 18 280 40 40 20 5 308 28 14 308 28 28 14 6 328 20 10 324 16 16 8 7 340 12 6 332 8 8 4 8 344 4 2 334 2 2 1Related Questions
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