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.

 

 

 

 

 

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