In: Economics
(a) The marginal values are as below.
Study Hours | MVF | MVE |
1 | 75-70=5 | 81-75=6 |
2 | 83-75=8 | 85-81=4 |
3 | 88-83=5 | 87-85=2 |
4 | 90-88=2 | 89-87=2 |
5 | 92-90=2 | 90-89=1 |
The marginal value of each grade would be the ratio of difference between consecutive grades and difference between study hours (which is 1 for each case).
(b) The time spend on finance would be 3 hours and time spend on economics would be 2 hours. This is obtained as MV of finance and economics are closer where F=3 and E=2, subjected to the constraint. The reasoning behind this is that, increasing (by 1 study hour) F from 3 would increase the total grades by 2, but would also then reduce the total grades by 4, making the net increment of grade as -2 (which is loss of total grades by 2). Also, increasing (by 1 study hour) E from 2 would increase the total grades by 2 but then would also reduce the grade by 5, making the net increment of grades as -3 (loss in total grades by 3). Hence, at F=3 and E=2, the total grades will be maximized.
We have the constraint as , as there are 5 hours to allot. The maximization of grades can be confirmed be as below.
Distribution (F+E=5) | Total Grades |
F=0,E=5 | 70+90=160 |
F=1,E=4 | 75+89=164 |
F=2,E=3 | 83+87=170 |
F=3,E=2 | 88+85=173 |
F=4,E=1 | 90+81=171 |
F=5,E=0 | 92+75=167 |
As can be seen, it can be confirmed that the total grades are maximum at where F=3 and E=2.