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a)
Labeled budget line on the graph
a)
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Explanation of Solution
Labeled budget line on the graph:
Introduction: A budget line is the graphical presentation of a price line that shows possible combination of goods that can be bought at various costs or different levels of income.
b)
b)
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Explanation of Solution
Snacks ($4) | Drinks ($2) | ||||
Q | Total utilities | Marginal utility | Q | Total utilities | Marginal utility |
1 | 15 | 1 | 12 | ||
2 | 25 | 10 | 2 | 21 | 9 |
3 | 31 | 6 | 3 | 29 | 8 |
4 | 34 | 3 | 4 | 36 | 7 |
5 | 36 | 3 | 5 | 42 | 6 |
6 | 47 | 5 | |||
7 | 50 | 3 | |||
8 | 52 | 2 |
Marginal utility for fourth unit of drink is 7,
And, marginal utility per dollar is 3.5
Introduction: Marginal utility refers to the benefit or satisfaction of person by consuming one additional unit of the good.
c)
Optimal consumption rule
c)
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Explanation of Solution
According to the optimal consumption rule, the marginal utility per dollar spend is the same for each product when the consumer enjoys the maximum utility by consuming or using goods or resources.
Introduction: Optimal consumption is the maximum utility that a person can gain from consuming a resource.
d)
Drinks and snacks that should be purchased to maximize the utility
d)
![Check Mark](/static/check-mark.png)
Explanation of Solution
To maximize the utility, 2 snacks, 6 drinks should be purchased because the total spending is $20 and by spending $8 on snacks and $12 on drinks one can enjoy the maximum utility.
Introduction: Marginal utility refers to the benefit or satisfaction of person by consuming one additional unit of the good.
Chapter 51 Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
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