Question

2. Ali has a $7 weekly budget that he spends on songs (S, SI per download) and prosein bars (B, S1 per bar). His usility information for the two products is below from songsof a song y fTotal utiliay Marginal wtilityQuantity ofTotal utility Marginal utility of a bar from bars protein bars 10 18 14 18 21 28 30 31 a) Calculate Ali's marginal utilities and finish the filling out the table b) If Ali spends his entire budget on songs, he could buy songs; and he spends his entire budget bars. on protein bars, he could buy c) Plot Ali's budget line on the graph below. Make sure to indicate the maximum amounts of goods d) What is the slope of the budget lie? Songs e) Cakculate, for each of the bundles below: ratio of marginal utilities, total utility from a bundle, and the total cost of a bundle. Note that the ratio of marginal utilities MUs/MUs is consumer's MRS (which is the slope of an indifference curve). Total utility from the bundle Cost of the bundle A: 2 songs 4 bars 4 songs. 3 bars | C: 5 songs:4 hars 5 bars 1) Which bundle among the 4 above bundles would give Ali the most utility? can afford? Indicate Ali's opkimal consamption bundle as point "1" on the graph above. Which bundles Ali Which bundle Ali will choose in order to maximize his utility? g) What is the slope of an indifference curve at Ali's optimal bundle? indifference curve and the budget line the same at the optimal bundle? slopes of an i) One week Ali spent his moncy on going out with friends, and he had only $5 left to spend on his favorite music and protein bars. Illustrate the decline in his budget on the budget line (use the same plane above). How will this decline in his budget affect his level of consumption of bars and songs? Calculate his total utility and shade-in the cells that consumer can afford Total Uility Bars/ 0I 2 Songs/ 0

Answer 1

2

a)

Quantity of songs	Total utility from songs	Marginal utility of a songs	Quantity of protein bar	total utility from bar	Marginal utility of a bar
0	0	_	0	0	_
1	10	10- 0= 10	1	8	8 - 0 = 8
2	18	18 - 10 = 8	2	14	14- 8 =6
3	24	24 - 18 = 6	3	18	4
4	28	4	4	21	3
5	30	2	5	23	2
6	31	1	6	24	1

b) Total budget = $7

Price of a song = $1

Price of a bar = $1

If Ali spend his entire budget on song, he could buy 7 (7/1) songs and he spend his entire budget on protein bar, he could buy 7 (=7/1) bars.

c) Ali's budget line

d) Slope of the budget line = 1

**first 4 parts are done, please post other parts in a separate question*