Question

The table below shows total utility for two products. Suppose that the price for product A is $5 and the price for product B is $5.

Number of product A	Total Utility for A	Number of product B	Total Utility for B
0	0	0	0
1	140	1	180
2	260	2	340
3	360	3	460
4	440	4	520
5	500	5	540

Suppose that a person has $25.

4. How many units of product B should she buy to maximize her happiness given her budget constrain?

Answer 1

Total budget = 25

Quantity	Total utility from A	Marginal utility from A	Marginal utility per dollar from A (p=5)	Total utility from B	Marginal utility from B	Marginal utility per dollar from b (p=5)
0	0	0	0	0	0	0
1	140	140	28.00	180	180	36.00
2	260	120	24.00	340	160	32.00
3	360	100	20.00	460	120	24.00
4	440	80	16.00	520	60	12.00
5	500	60	12.00	540	20	4.00

Selection for consumption of goods will be decreasing order of MU/Dollar

Total 2 units of A and 3 units of B will be consumed to maximize her utility