Question

The following table displays the total utility U(X) that corresponds to the number of units of X consumed by three different consumers (Auon, Barbara, and Camira), holding everything else constant: Auon Barbara Camira

Auon		Barbara		Camira
U(X)	X	U(X)	X	U(X)	X
10	2	10	2	10	2
14	3	10	3	12	3
16	4	10	4	15	4
17	5	9	5	19	5
17.5	6	8	6	24	6

-Compute the marginal utility of X for each of the three consumers at each level of X.

-Based on the data in the table, can you tell whether any of these consumers are violating any of the standard assumptions about preferences?

-Is it possible that any of these three consumers have the same preferences, and that columns for the three consumers differ only because of the arbitrary units that are used to measure utility? Explain.

Answer 1

a)

X	Auon	Barbara	Camira
2	-	-	-
3	4	0	2
4	2	0	3
5	1	-1	4
6	0.5	-1	5

b) Barbara is violating the more-is-better assumption, as her marginal utility remains the same or decreases as consumption increases.

c) No two consumers have the same preferences in this example. Auon experiences diminishing, but positive, marginal utility. Barbara’s marginal utility actually becomes negative. Camira’s marginal utility increases as more is consumed.