Question

27) Consider the following information Quantity Consumed Candy Bars Apples Total Marginal per WeekityUtility Total Utility Marginal Utility 0 10 18 25 29 31 30 0 15 24 30 32 31 29 a. Complete the columns containing the marginal utilities of each good. b. With unlimited income, a consumer described by the above information would consume candy bars andapples. If candy bars cost 25 cents each and apples are two for a quarter (12.5 cents each) and the consumer has $1.50 to spend on candy and apples, what quantity of candy bars and apples will allow the above individual to reach consumer optimum? c.

Answer 1

a)

                       Candy                                                                                            Apples                             

Q	TU	MU		TU	MU
0	0			0	0
1	10	-		15	-
2	18	8		24	9
3	25	7		30	6
4	29	4		32	2
5	31	2		31	-1
6	30	-1		29	-2

b)

Would consume 5 Candies and 4 apples.

c)

MUc/Pc = MUa/Pa

4/25 = 2/12.5 = 0.16

Hence reaching equilibrium, 4 units of each commodity shall be consumed.