1. Use the following information to answer the following table, representing an
ID: 1181115 • Letter: 1
Question
1. Use the following information to answer the following table, representing an individual's quantity of consumption and total utility over a given period of time to answer the following questions.
Quantity
Total Utility
0
0
1
8
2
18
3
30
4
41
5
51
6
60
Refer to the utility table above. Marginal utility begins to decline when this individual consumes the _____ quantity.
a. 2nd
b. 3rd
c. 4th
d. 5th
If MU1/P1 < MU2/P2 at the current consumption bundle, the consumer should consume __________. With this adjustment, MU1 ____ and MU2 _____.
Quantity
Total Utility
0
0
1
8
2
18
3
30
4
41
5
51
6
60
Explanation / Answer
a) 4th unit..
Working is shown in the form of the table below:
Quantity
Total Utility[TU[
Marginal Utility
[Change in Total Utility/Change in No:of quantity]
0
0
0
1
8
8
2
18
10
3
30
12
4
41
11
5
51
10
6
60
9
The answer to the next part is (b)
Reason:
This is because Marginal Utility obtained from good 2 is more tham that of good 1. So, we need to increase the consumption of good 1 to good 2.
Quantity
Total Utility[TU[
Marginal Utility
[Change in Total Utility/Change in No:of quantity]
0
0
0
1
8
8
2
18
10
3
30
12
4
41
11
5
51
10
6
60
9
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