Question

The Table below shows the Total Utility (TU) and Marginal Utility (MU) derived from the consumption of 10 units of the commodities X and Y. a. Derive a column for the Marginal Utility of x (MU), and a column for the Total Utility of y (TU) b. On separate graphs, plot the Total and Marginal curves for each commodity, placing the panel of the marginal utility curve below the panel for the total utility curve for each commodity saturation and mark it on both the table and graph for each. observations of the slopes c. Determine at what unit of each commodity a consumer reaches the point of d. Describe the behavior of both curves for each commodity based on vour e. At what unit a consumer reaches equilibrium if he buys both commodities when their prices are P $2 and P-$1 f. What must be the consumer budget, which he spends entirely on the two commodities? 0 4 10 2 13 3 18 4 22 5 25 6 27 7 27 826 9 25 10 23 4 0

Answer 1

(a)

MUx = Change in TUx / Change in Q

MUy = Change in TUy / Change in Q, Therefore Change in TUy = Change in Q x MUy

Q	TUx	MUx	TUy	MUy
0	0		0	0
1	7	7	4	4
2	13	6	14	10
3	18	5	22	8
4	22	4	28	6
5	25	3	32	4
6	27	2	34	2
7	27	0	34	0
8	26	-1	33	-1
9	25	-1	31	-2
10	23	-2	28	-3

(b)

TUx & MUx Graph:

TUy & MUy Graph:

(c) Point of Saturation is at that level of Q for which TU is maximized & MU is zero.

For X, this is when Q = 7

For Y, this is when Q = 7

This is marked as the Boldened row in table & the arrow in the graphs.

(d) At initial levels of Q, TU increases but with decreasing slope. Therefore, MU starts decreasing. When TU is maximized, MU is zero and when TU starts to fall, MU becomes negative.

NOTE: As HOMEWORKLIB Answering Guidelines, 1st 4 parts are answered.