I’m studying for my Economics class and need an explanation.
Marginal Utility-Budget
You are consuming 2 goods: good A and good B
The price of good A=$1 and the Price of good B = $2
Your budget is $10
Using the appropriate information answer the questions below
Number of units MUa MU B
First 10 24
Second 8 20
Third 7 18
Fourth 6 16
Fifth 5 12
Sixth 4 6
Seventh 3 4
- How many units of A and B should you purchase?_________________
- What is the maximum TU (total utility) can you get from your budget of $10_________________________
- If you were to trade the last unit of B (at $2 per unit) for 2 units of A (at $1 per unit), how large would your TU be?__________________
- If your income is raised to $14, how many units of A and of B should you consume?_________________________
- What will be your TU from the $14 income?_____________________
- If you were to trade the last unit of B (at income of $14) for 2 units of A instead, what would be your TU?_________________________
