Question

4. The following tables show the utility Ned receives from either buying books or going out to eat. Assume the price of each book is $40 and the price of eating out is $10. Each month, Ned has $400 to spend each month to either good. (6 pts.) a. Complete the following table by calculating the marginal utility and marginal utility per dollar of buying books. Total Utility from Marginal Utility (MU) MU per Dollar for Quantity of Books Books from Books Books 1,000 1,000 1,900 2,700 3,400 4,000 4,500 4,900 b. Complete the following table by calculating the marginal utility and marginal utility per dollar of eating out. Total Utility from Marginal Utility (MU) MU per Dollar for Quantity of Eating Out Eating Out from Eating Out Eating Out 3,780 280 4,760 5,600 6,300 6,860 7,280 7,560

Answer 1

Q of books	TU books	MU Books	MU/$ Books
1	1000	1000	25.0
2	1900	900	22.5
3	2700	800	20.0
4	3400	700	17.5
5	4000	600	15.0
6	4500	500	12.5
7	4900	400	10.0
Q of Eating Out	TU Eat out	MU Eat Out	MU/$ Eat Out
12	3780	280	28.0
16	4760	245	24.5
20	5600	210	21.0
24	6300	175	17.5
28	6860	140	14.0
32	7280	105	10.5
36	7560	70	7.0

MU = Change in TU/Change in Q

MU/$ = MU/Price

Quantity at which MU/$ of two commodities are equal

4 units of books and 24 units of Eating Out

Total Expenditure = 4*40+24*10 = $400