Assume that John has RO 21 to spend on Energy drink and Protein bars each month and that both goods must be purchased whole (no fractional units). Energy drink (X) cost RO 3 and Protein bars (Y) cost RO 2 each. John’s preferences for movies and books are summarized by the following information: No. per Month Energy drink No. per Month Protein bars TU MU MU/Px TU MU MU/Py 1 84 1 36 2 156 2 66 3 216 3 90 4 264 4 108 5 300 5 120 6 324 6 126 7 336 7 126 Fill in the figures for marginal utility of X and marginal utility of Y per dollar for both movies and books. Are these preferences consistent with the law of diminishing marginal utility? Explain briefly. Given the budget of RO 21, what quantity of Energy drink (X) and what quantity of Protein bars (Y) will maximize John’s level of satisfaction? Explain
- Assume that John has RO 21 to spend on Energy drink and Protein bars each month and that both goods must be purchased whole (no fractional units). Energy drink (X) cost RO 3 and Protein bars (Y) cost RO 2 each. John’s preferences for movies and books are summarized by the following information:
|
No. per Month |
Energy drink |
No. per Month |
Protein bars |
||||
|
TU |
MU |
MU/Px |
TU |
MU |
MU/Py |
||
|
1 |
84 |
|
|
1 |
36 |
|
|
|
2 |
156 |
|
|
2 |
66 |
|
|
|
3 |
216 |
|
|
3 |
90 |
|
|
|
4 |
264 |
|
|
4 |
108 |
|
|
|
5 |
300 |
|
|
5 |
120 |
|
|
|
6 |
324 |
|
|
6 |
126 |
|
|
|
7 |
336 |
|
|
7 |
126 |
|
|
- Fill in the figures for
marginal utility of X and marginal utility of Y per dollar for both movies and books. - Are these preferences consistent with the law of diminishing marginal utility? Explain briefly.
- Given the budget of RO 21, what quantity of Energy drink (X) and what quantity of Protein bars (Y) will maximize John’s level of satisfaction? Explain briefly.
Given Data:
John has RO to spend on energy drink and protein bars = 21
Energy Drink (x) Cost RO =3 each
Protein Bars (y) Cost RO = 2 each
Given is the table that summarizes following information:
Answer- 1
Answer- 2.
The Law of Diminishing Marginal Utility: This law explains that as the person/individual consumes an item or a product, the satisfaction or utility that they derived from that product declines as they consumes more and more of that product.
Therefore above preference matches with the law of diminishing marginal utility because john’s utility of satisfaction decreases at each level as he consumes more and more quantity of energy drinks and protein bars.
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