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

Solutions

Expert Solution

Income is 14 and budget equation is 14 = 2*TB + 2*C

Now total utility is maximum when TB = 3 and C = 4

Entire money is spent (3*2 + 4*2) = $14

Total utility = 23 + 34) = 57 utils

Hence total utility is maximized at 57

Rahul Sunny answered 1 year ago

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