Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
Textbook Question
100%
Chapter 6, Problem 2SCQ

Take Jeremy’s total utility information in Exercise 6.1, and use the marginal utility approach to confirm the choice of phone minutes and round trips that maximize Jeremy’s utility.

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How can one's choice of purchases/consumption be infuenced by utility or marginal utility?
Donald likes fishing (X1) and hanging out in his hammock (X2). His utility function for these two activities is u(x1, x2) = 3X12X24. (A) Calculate MU1, the marginal utility of fishing. (B) Calculate MU2, the marginal utility of hanging out in his hammock. (C) Calculate MRS, the rate at which he is willing to substitute hanging out in his hammock for fishing. (D)Last week, Donald fished 2 hours a day, and hung out in his hammock 4 hours a day. Using your formula for MRS from (c) find his MRS last week. (E) This week, Donald is fishing eight hours a day, and hanging out in his ham­ mock two hours a day. Calculate his MRS this week. Has his MRS increased or decreased? Explain why? (F) Is Donald happier or sadder this week compared to last week? Explain.
solve both the questions in the image provided.
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