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(The Law of Demand and Marginal Utility) Daniel allocates his budget of $24 per week among three goods. Use the following table of marginal utilities for good A , good B and good C to answer the questions below: Q A MU A Q B MU B Q C MU C 1 50 1 75 1 25 2 40 2 60 2 20 3 30 3 40 3 15 4 20 4 30 4 10 5 15 5 20 5 7.5 a. If the price of A is $2, the price of B is $3 and the price of C is $1, how much of each does Daniel purchase in equilibrium? b. If the price of A rises to $4 while other prices and Daniel’s budget remain unchanged, how much of each does he purchase in equilibrium? c. Using the information from parts (a and (b), draw the demand curve for good A . Be sure to indicate the price and quantity demanded for each point on the curve.

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ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548
BuyFind

ECON: MICRO4 (New, Engaging Titles...

4th Edition
William A. McEachern
Publisher: Cengage Learning
ISBN: 9781285423548

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Chapter
Section
Chapter 6, Problem 2.6PA
Textbook Problem

(The Law of Demand and Marginal Utility) Daniel allocates his budget of $24 per week among three goods. Use the following table of marginal utilities for good A, good B and good C to answer the questions below:

QA MUA QB MUB QC MUC
1 50 1 75 1 25
2 40 2 60 2 20
3 30 3 40 3 15
4 20 4 30 4 10
5 15 5 20 5 7.5

a. If the price of A is $2, the price of B is $3 and the price of C is $1, how much of each does Daniel purchase in equilibrium?

b. If the price of A rises to $4 while other prices and Daniel’s budget remain unchanged, how much of each does he purchase in equilibrium?

c. Using the information from parts (a and (b), draw the demand curve for good A. Be sure to indicate the price and quantity demanded for each point on the curve.

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