1. Fill in the missing information in the table below: Marginal Marginal Total m
ID: 1140724 • Letter: 1
Question
1. Fill in the missing information in the table below: Marginal Marginal Total monetary utility of Total monetary Number of utility ofMonetary utility monetary utility of cookies Number cookiescookies pretzels pretzels of pretzels 25 10 18 24 10 50 2. Suppose that cookies and pretzels cost $1 each. Wei has the preferences shown in the table in question 1 a. If Wei has $I to spend, should she purchase a cookie or a pretzel? Explain your reasoning Now suppose Wei gets an additional dollar of income, so that she has a budget of s2. Should she buy a cookie or a pretzel with this additional dollar of income? Explain your reasoning, using both marginal utility and total utility b. Wei finds another dollar on the ground. Assume that she is starting from the purchases she made with $2 (your answer to part b), should she buy a cookie or a pretzel with this third dollar of income? Explain your reasoning. c.Explanation / Answer
We calculate MU(Marginal Utility) by using the formula MUn=TUn-TUn-1
2a) if Wei has $1 to spend she will spend it buying a cookie as the marginal utility derived consuming 1 unit of cookie is higher than that of consuming a pretzel.
b) Wei when given another additional dollar will again opt for a cookie. This is because the MU on consuming the additonal cookie is 15 units as opposed to the 8 units derived when consuming the additional pretzel. Furthermore, the TU derived consuming 2 cookies is 40 units as opposed to the 18 units derived consuming pretzel.
c) She should continue on buying a cookie because she will derive more utility consuming a cookie than a pretzel. Reason same as 2b.
TABLE 1 No.of cookies Total monetary utility of cookies Marginal monetary utility of cookies No.of Pretzels Total Monetary utility of Pretzels Marginal Monetary utility of Pretzels 0 0 - 0 0 - 1 25 25 1 10 10 2 40 15 2 18 8 3 50 10 3 24 6 4 55 5 4 28 4 5 55 0 5 30 2 6 50 -5 6 30 0Related Questions
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