Question

In: Economics

Suppose movie downloads cost $1 apiece and game downloads cost $2. If the marginal utility of...

Suppose movie downloads cost $1 apiece and game downloads cost $2. If the marginal utility of movie downloads at the optimal mix of consumption is 20 utils, what is the marginal utility of a game download?

Instructions: Enter your answer as a whole number.

utils

Expert Solution

Utility Maximizing Condition

In order to maximize Utility a consumer consumes that amount of A and B such that :

(Marginal Utility of A / per unit price of A) = (Marginal Utility of B / per unit price of B)

Here In order to maximize utility he should consume that amount of movie download and game download such that

(Marginal Utility of Movie download / per unit price of movie download) = (Marginal Utility of Game download / per unit price of Game download)

It is given that movie downloads cost $1 apiece and game downloads cost $2

=> per unit price of movie download $1 and per unit price of Game download = $2

Also, It is given that the marginal utility of movie downloads at the optimal mix of consumption is 20 utils

=> Marginal Utility of Movie download = 20

So,

(Marginal Utility of Movie download / per unit price of movie download) = (Marginal Utility of Game download / per unit price of Game download)

=> 20/1 = Marginal Utility of Game download / 2

=> Marginal Utility of Game download = 20 *2 = 40.

Hence, the marginal utility of a game download = 40 utils

Rahul Sunny answered 1 year ago

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