Chapter 20  Demand Theory and Consumer Choice Homework Questions

1. Use the utility maximizing rule to determine how many of goods A, B, and C to purchase with a \$22 budget.
List the order in which the goods would be purchased.

 Good A costs \$4.00 Good B costs \$3.00 Good C costs \$2.00 Qt.                 MU           MU/\$ Qt.             MU              MU/\$ Qt.                MU              MU/\$ 1                    8               2.0 1                 6                  2.0 1                 2.0               1.0 2                    6                1.5 2                   5                 1.67 2                 2.0               1.0 3                    4                1.0 3                  4                 1.33 3                1.5              0 .75 4                    2                0.5 4                  3                  1.0 4                 1.5              0.75 Answer

2. Explain why most consumers receive a surplus when purchasing a product.

3. Graph the following data and calculate the MRSXY.