Number of Cheeseburgers Total Utility of Cheeseburgers Marginal Utility of Chees
ID: 1159288 • Letter: N
Question
Number of Cheeseburgers Total Utility of Cheeseburgers Marginal Utility of Cheeseburgers Bags of French Fries Total Utility of French Fries Marginal Utility of French Fries 10 20 36 48 56 60 20 16 12 10 18 20 20 4 4 5 4 If the price of a cheeseburger is $2, the price of a bag of french fries is $1, and you have $6 to spend (and you spend all of it), what is the utility-maximizing combination of cheeseburgersand french fries Suppose that the price of cheeseburgers falls to $1. What is the utility-maximizing combination of cheeseburgersand french fries?Explanation / Answer
Qty TU MU MU/Price MU/Price Qty of TU MU MU/ Price Cheeseburger at $ 2/unit At $1/unit French fries 0 0 0 0 0 0 0 0 0 1 20 20 10 20 1 10 10 10 2 36 16 8 16 2 18 8 8 3 48 12 6 12 3 20 2 2 4 56 8 4 8 4 20 0 0 5 60 4 2 4 5 Now, With income $ 6 The consumer will buy 2 units of Cheeseburgers and 2 units of French fries. (this is due to fact that last unit of $ spent on each commodity gives equal Marginal utility per $ i.e. 8 per $) When price of Cheeseburger fall to $1 (New MU/ Price at price $1 has been computed in chart) The consumer will buy 3 units of Cheeseburgers and none of French fries. (As the all three units of cheeseburgers give MU more than first unit of French fries)
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