Chapter 10, Problem 7P

To determine

To answer:

The following question based on the accompanying table given

Concept Introduction:

Marginal utility per dollar: This is calculated by dividing marginal utility of a good by the price of the good

Marginal utility: This is the additional benefit or satisfaction derived from the consumption of an additional unit of a commodity or service.

Utility: This is the benefit or satisfaction derived from the consumption of a good or service

Explanation of Solution

1. The bundles available for Damien if he spends all of his income either going for gym or watching a movie

Gym visits, movies

Gym visits, movies

Gym visits, movies

Gym visits, movies

Gym visits, movies

Gym visits, movies

Gym visits, movies

Gym visits, movies



The above graph shows the budget curve of Damien with his income spent on either going for movies or going to the gym.

Quantity of Gym visits	Utility from gym visits	Marginal utilities from gym visits	Marginal utilities per hour	Quantity of movies	Utility from movies	Marginal utility from movies	Marginal utilities per hour
		-	-			-	-

2. The above table shows the marginal utility of each gym visit and each movie show and it also shows the marginal utility per hour spent at the gym and the marginal utility per hour spent at watching movies.



3. The above diagram shows the marginal utility per hour spent on gym visits and the marginal utilities per hour spent on movies, the intersection of both curves is shown by the point ‘E’ and this point is considered as the optimal point which represents the optimal choice for Damien. The optimal bundle for Damien is the bundle containing gym visits and movies where the marginal utility per hour spent on gym equals the marginal utility of per hour spent on watching movies.