Question

Hours playing Hours golf playing tennis 70 2 10 12 T14 Q6 Cindy has $70 a month to spend, and she can spend as much time as she likes playing golf and tennis. The price of an hour of golf is $10, and the price of an hour of tennis is $5. The table shows Cindy's marginal utility from each sport. a) How many hours of golf and how many hours of tennis does she play to maximize her utility? b) Compared to part (a), if Cindy spent a dollar more on golf and a dollar less on tennis, by how much would her total utility change? c) Compared to part (a), if Cindy spent a dollar less on golf and a dollar more on tennis, by how much would her total utility change? Hours per month Marginal utility Marginal utility from golf from tennis 180 40 6036 40 30 30 10 102

Answer 1

a).

Consider the given problem here Cindy has $70 a month to spend on either golf or tennis or in both in different combination of times. The following table shows the MU from each sports and the additional utility from additional dollar spend on each sports that is the ratio of MU to price.

Hours per month Mug Mug/Pg MUt/Pt 80 2 7.2 1 van w Mut 40 60 36 40 30 30 10 205 10 2 no 00 0 1 0.6 1 .4 0.2

Here for “G=5” and “T=4” the ratio MU to price is equal to “2”. So, the optimum time devoted to golf and tennis are “5 hours” and “4 hours” respectively.

b).

if Cindy spent a dollar more on golf and a dollar less on tennis then utility from golf will increases by “1” and utility from tennis will decreases by “2”. So, the change in total utility is given by “1 – 2 = (-1)”, => total utility decreases by 1.

c).

if Cindy spent a dollar less on golf and a dollar more on tennis then utility from golf will decreases by “2” and utility from tennis will increases by “1”. So, the change in total utility is given by “1 – 2 = (-1)”, => total utility decreases by 1.