Question

During zoom class lecture fill in the information and answer the questions below: units MUS MUper $ TU MUD MUper$ TU Price of A=$1; Price of B= $2;budget=$10 1 10 24 8 N 20 3 7 18 4 6 16 5 5 12 6 4 6 How many units of A and B should you buy? What is your maximum TU from your budget of $10? If your budget goes up to $14, how many units of A and B should you buy? TU for that?

Answer 1

MU per $ = MU / Price

TU is the aggregate of MU correspondingly.

Units	MUa	MUa per $	TUa	MUb	MUb per $	TUb
1	10	10/1 = 10	10	24	24/2 = 12	24
2	8	8	10 + 8 = 18	20	20/2 = 10	24 + 20 = 44
3	7	7	18 + 7 = 25	18	9	44 + 18 = 62
4	6	6	31	16	8	78
5	5	5	36	12	6	90
6	4	4	40	6	3	96

How may units:

This is to be found where there is the equality of [MUa per $] and [MUb per $] that exhausts the whole budget ($10).   

This happens for 2 units of “A” and 4 units of “B”, where [MUa per $] = [MUb per $] = 8, and $10 = 2 × $1 + 4 × $2 or $10 = $10.

Number of units: A = 2; B = 4 (Answer)

Maximum TU = TUa at 2 units + TUb at 4 units

                        = 18 + 78

                        = 96 (Answer)

New budget $14:

This happens for 4 units of “A” and 5 units of “B”, where [MUa per $] = [MUb per $] = 6, and $14 = 4 × $1 + 5 × $2 or $14 = $14.

Number of units: A = 4; B = 5 (Answer)

Maximum TU = TUa at 4 units + TUb at 5 units

                        = 31 + 90

                        = 121 (Answer)