Shoes Michelle 12 Marginal Utility of Marginal Utility of Coffee 6 Renee 6 6 Douglas 6 3 Paul 3 6 Shannon 12 3

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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The marginal utility for shoes and coffee is given below for five individuals. A pair of shoes costs $2, and a cup of coffee costs $1.

Which of these consumers are optimizing over their choices? Explain 

For those who are not, how should they adjust their spending? Explain 

“Pasta is Miguel’s favorite meal therefore the law of diminishing marginal utility does not apply”. Do you agree with this statement? 

It is known that the indifference curve is convex. What does this tell you about the relationship between the goods? 

The income effect and the substitution effect work in the same direction for a normal good. Explain how this differs for an inferior good. 

Shoes
Michelle
12
Marginal Utility of
Marginal Utility of
Coffee
6
Renee
6
6
Douglas
6
3
Paul
3
6
Shannon
12
3
Transcribed Image Text:Shoes Michelle 12 Marginal Utility of Marginal Utility of Coffee 6 Renee 6 6 Douglas 6 3 Paul 3 6 Shannon 12 3
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