Assume your consumption this week included chicken and steak. the marginal utility of chicken is 12 and chicken costs $7

Assume your consumption this week included chicken and steak. the marginal utility of chicken is 12 and chicken costs $7. while the marginal utility of steak is18. while steak costs $ 9. should you change your consumption next week to increase/maximize your utility? explain.

Solutions

Expert Solution

At the optimal point, the marginal utility per unit of dollar spent on each good must be the same

For chicken, MUchicken / Pchicken = 12/7 = 1.72

For steak, MUsteak / Psteak = 18/9 = 2

Since, the marginal utility per dollar is higher for steak than chicken, this is not the utility maximization point. Thus, the consumer should increase his consumption of steak relative to chicken. This will decrease the marginal utility of steak and should be continued until the marginal utility per unit of dollar spent is same for chicken and steak.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility....

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility. In addition, discuss the mechanism of the law of diminishing marginal utility in this experience and the impact of the related assumptions used in our course?

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility....

Explain one of your consumption experience that illustrates the concepts of total utility and marginal utility. In addition, discuss the mechanism of the law of diminishing marginal utility in this experoence and the impact of the related assumptions used in our course?

Suppose marginal utility from leisure is given by 3c0.5/(2ℓ0.5) and marginal utility from consumption is given...

Suppose marginal utility from leisure is given by 3c0.5/(2ℓ0.5) and marginal utility from consumption is given by 3ℓ0.5/(2c0.5) and that an individual can work up to 24 hours per day at a wage of $20 per hour. A. Write the mathematical condition which must be satisfied in order for a worker to participate in the labour force. Write the two mathematical conditions which a participant's optimal choice must satisfy (write them in terms of c and ℓ rather than Y...

Suppose your marginal utility for meals at the campus cafeteria this week has fallen to zero....

Suppose your marginal utility for meals at the campus cafeteria this week has fallen to zero. Explain what has happened to your total utility curve derived from consuming these meals. Now explain what will happen to total utility if you eat more meals at the cafeteria this week. Why?

Explain how the concept of marginal utility can be used to find the utility maximizing consumption...

Explain how the concept of marginal utility can be used to find the utility maximizing consumption bundle. Explain using the most intuitive terms you can.

Units 1 Marginal Utility 10 8 5 Marginal Utility 12 2 Total Utility 1018 23 262727...

Units 1 Marginal Utility 10 8 5 Marginal Utility 12 2 Total Utility 1018 23 262727 27 10 7 5 3 4 5 6 7 Total Utility 22 2934 3637 37 31 TABLE 6-1 Refer to Table 6-1 . If the prices of both toffee bars and bags of cashews are $ 2 and this consumer has $ 14 per week to spend on these two snacks , what is the maximum total utility achievable ? 57 10 3315 45

What is the marginal utility when total utility increases from 34 to 42 after consumption of...

What is the marginal utility when total utility increases from 34 to 42 after consumption of 1 unit? A) 2 B) 4 C) 6 D) 8 Calculate total utility based on the following information; Unit 1 Marginal Utility = 9 Unit 1 Marginal Utility = 8 Unit 1 Marginal Utility = 4 Unit 1 Marginal Utility = 1 A) 22 B) 23 C) 24 D) 25 Calculate accounting profit using the following data: Explicit costs = $40,000 Implicit costs =...

Would increases or decreases in rate of time preference, the elasticity of the marginal utility consumption,...

Would increases or decreases in rate of time preference, the elasticity of the marginal utility consumption, and rate of growth rate of the economy make projects more or less justifiable according to dynamic efficiency?

Question 21. Shelley is maximizing utility in her consumption of mansions and Porsches. If the marginal...

Question 21. Shelley is maximizing utility in her consumption of mansions and Porsches. If the marginal utility from her last purchased mansion is twice the marginal utility from her last purchased Porsche, then we know A) Shelley buys twice as many mansions as Porsches. B) Shelley buys twice as many Porsches as mansions. C) Shelley buys more Porsches than mansions, but we do not know how many more. D) the price of a mansion is twice the price of a...

Subjects