1. If the price of one Weight Watchers frozen dinner is $2 and the price of one dozen jelly doughnuts is $1, which of the following would Kent, a utility-maximizing consumer, buy with his $6?
2. If the price of one Weight Watcher's frozen dinner is $2 and the price of one dozen jelly doughnuts is $3, which of the following would Kent, a utility maximizing consumer, buy with his $6?
Homework Answers
Question 1
Following is the required table -
|
Jelly Donuts |
Frozen Dinners |
||||||
|
Q |
TU |
MU |
MU/P |
Q |
TU |
MU |
MU/P |
|
0 |
0 |
- |
- |
0 |
0 |
- |
- |
|
1 |
12 |
12 |
12 |
1 |
16 |
16 |
8 |
|
2 |
21 |
9 |
9 |
2 |
32 |
16 |
8 |
|
3 |
27 |
6 |
6 |
3 |
46 |
14 |
7 |
|
4 |
30 |
3 |
3 |
4 |
46 |
0 |
0 |
|
5 |
30 |
0 |
0 |
5 |
42 |
-4 |
-2 |
|
6 |
28 |
-2 |
-2 |
6 |
36 |
-6 |
-3 |
Kent will start his consumption from jelly donut as MU per dollar spent of Ist unit of jelly donut is greater than the MU per dollar spent of Ist unit of frozen dinner. Jelly donut costs $1. So, after this, Kent will left with $5.
Kent will again purchase the jelly donut as MU per dollar spent of IInd unit of jelly donut is still greater than MU per dollar spent of Ist unit of frozen dinners. Jelly donut costs $1. So, after this, Kent will left with $4.
Now, Kent will purchase Ist unit of frozen dinners as MU per dollar spent of the Ist unit of frozen dinners is greater than the MU per dollar spent of the IIIrd unit of jelly donut. Frozen dinners costs $2. So, after this, Kent will left with $2.
Kent will purchase the IInd unit of frozen dinner as MU per dollar spent of the IInd unit of frozen dinners is greater than the MU per dollar spent of the IIIrd unit of jelly donut. Frozen dinners costs $2. So, after this, Kent will left with $0.
Thus,
Kent, a utility-maximizing consumer, will buy 2 units of Jelly donuts and 2 units of Frozen dinners.
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