Question

The table below shows your total utility from eating slices of pizza and drinking pints beer.

Quantity	Total Utility for Beer	Total Utility for Pizza	Marginal Utility for Beer	Marginal Utility for Pizza	Marginal Utility per $ for Beer (a)	Marginal Utility per $ for Pizza (a)	Marginal Utility per $ for Pizza (b)
0	0	0	—	---
1	8	6
2	15	11
3	21	15
4	26	18
5	30	20
6	33	21

a(2). On Tuesday night you have $10, and head to Vitos after another arduous Economics exam. A slice of pizza is $1, and the price of a pint beer is $2.00 (Natty Bo). Complete the table up to the last column. How many slices of pizza and pints of beer will you buy in order to maximize your utility? What is your total utility from both pizza and beer? Explain how you are getting your answer.

Answer 1

Marginal utility for good = Total utility from current quantity - Total utility from previous quantity

Marginal utility per dollar for a good = Marginal Utility / Price of that good

Quantity	Total utility from beer	Total utility from Pizza	Marginal utility from beer	Marginal Utility from pizza	Marginal utility per dollar from beer	Marginal utility per dollar from pizza
0	0	0	-	-	-	-
1	8	6	8	6	4	6
2	15	11	7	5	3.5	5
3	21	15	6	4	3	4
4	26	18	5	3	2.5	3
5	30	20	4	2	2	2
6	33	21	3	1	1.5	1

Income = $10

Price of beer = $2

Price of pizza = $1

Below are the combinations of pizza and a beer which consumer can consume on which total money spent is $10. Combnation A and B is not possble because maximum units of a good can be consumed is 6.

Combinations	Pizza	Beer	Marginal Utility per dollar from beer	Marginal utility per dollar from pizza	Maximum marginal utility per dollar
A	10	0	Not Possible from the above table	Not Possible from the above table	-
B	8	1	Not Possible from the above table	Not Possible from the above table	-
C	6	2	1	3.5	4.5
D	4	3	3	3	6
E	2	4	5	2.5	7.5
F	0	5	0	2	2

Maximum marginal utility per dollar occurs when 2 pizza and 4 beer is consumed.