The Table below shows the utility a college student obtains from digital music a

Question

The Table below shows the utility a college student obtains from digital music albums and lattes.

The Table below shows the utility a college student obtains from digital music albums and lattes Units of Marginal Margina Marginal goods Marginal utility of lattes per dollar spent utility of utility of utility of digital albums dollar spent 35 albums per lattes First Second Third Fourth 5.14 4 3.43 2.86 18 3.75 26.25 21 17.5 12 2.5 10 a) Suppose the student receives a coffee shop gift card worth $7. What is the total utility she derives from the gift card? Number utils b) What if she was given the cash instead? What would be the total utility in this case? Number utils

Explanation / Answer

Gift card of 7 he can only buy 1 unit of good.

Units TU digital album MU digital album MU of album per dollar spent TU Lattes MU lattes MU of lattes per dollar spent 1 35.0 35.0 5.0 18.0 18.0 5.1 2 61.3 26.3 3.8 32.0 14.0 4.0 3 82.3 21.0 3.0 44.0 12.0 3.4 4 99.8 17.5 2.5 54.0 10.0 2.9

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