Explanation At consumer equilibrium, Marginal Utility of last dollar spent on different goods must be equal. M U A P A = M U B P B = M U C P C = M U D P D MU A = 30 P A = $2 So, M U A P A = 30 2 = 15 Thus, marginal utility per dollar is 15. Marginal Utility of B At optimum utility combination, M U B P B = 15 P B given as $4, substituting this in the above equation, M U B P B = 15 M U B 4 = 15 M U B = 15 × 4 </ To determine (b) Ratio of MU to P for savings.

10th Edition

ISBN: 9781285859460

Author: BOYES, William

Publisher: Cengage Learning

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Question

Chapter 21, Problem 3E

To determine

(a)

Marginal utility of each good.

To determine

(b)

Ratio of MU to P for savings.

Expert Solution & Answer

Chapter 21 Solutions

Economics:

Ch. 21 - Prob. 1E Ch. 21 - Prob. 2E Ch. 21 - Prob. 3E Ch. 21 - Prob. 4E Ch. 21 - Prob. 5E Ch. 21 - Prob. 6E Ch. 21 - Prob. 7E Ch. 21 - Prob. 8E Ch. 21 - Prob. 9E Ch. 21 - Prob. 10E

Ch. 21 - Prob. 11E Ch. 21 - Prob. 12E Ch. 21 - Prob. 13E Ch. 21 - Prob. 14E Ch. 21 - Prob. 15E Ch. 21 - Prob. 16E Ch. 21 - Prob. 17E

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