Question

In: Economics

Describe two goods, services, or activities that you currently enjoy but your marginal utility per dollar...

  • Describe two goods, services, or activities that you currently enjoy but your marginal utility per dollar (or per unit of time) for the two goods is not equal.
  • Be specific in describing these two goods, services, or activities.
  • Use the rational spending rule to describe how you can re-arrange your spending (or time) in order to maximize your utility.
  • You can simply state that you should spend more money (or time) on one thing and less money (or time) on the other.
  • Describe what will happen to your marginal utility for each good (or activity) after you reallocate your spending (or time).

Solutions

Expert Solution

Ans.

Two goods, services, or activities that we currently enjoy but our marginal utility per dollar (or per unit of time) for the two goods is not equal are :

Good X- Movie = Spend 70 percent of money

Good Y- Paying Game = Spend 30 percent of money

A good initial phase in deciding how a purchaser will choose to allot their salary is knowing the fulfillment they get from a good. Be that as it may, before the ideal add up to purchase of any good the cost should likewise be thought of. As such, what is the "blast per buck" that a purchaser will get from the good?

We can decide the utility a purchaser gets utilizing the marginal utility per dollar spent, or MU/$.

To decide the MU/$, we partition the marginal utility a customer gets at a specific degree of utilization by the cost of the good.

To maximise the utility the consumer should spend more money on X and and less money on the other y good.

We can describe the utility function as u(x,y) = 0.7x+0.3y.


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