ECO 2023 - The following table contains information about the utility Sam derives
Question # 00307066
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Updated on: 06/05/2016 07:58 AM Due on: 07/05/2016
MICRO ECONOMICS UTILITY EXERCISE
The following table contains information about the utility Sam derives from donuts and coffee.
Complete the table by calculating the Marginal Utility (MU)
DONUTS
Q
0
COFFE
Total Utility (TU) Marginal Utility (MU)
0
Q
0
Total Utility (TU)
0
_________
1
20
______
1
50
_________
2
50
______
2
90
_________
3
70
______
3
120
__________
4
85
_____
4
130
_________
5
90
______
5
135
_________
6
92
MU
______
6
139
1. Diminishing marginal utility first occurs for Sam with which unit of donuts? ________ which unit
of coffee? _______________
2. If the price of donuts is $1 each, the price of coffee is $2 each, and Sam has $10 to spend, how
many donuts and how many coffees must Sam buy to maximize his total utility?
Q donuts = __________________ Q coffee = _________________
3. If the price of coffee falls to $1, while the price of donuts stays at $1, and Sam’s income stays at
$10 how many donuts and how many coffees does Sam buy if he wants to maximize his total
utility now?
Q donuts = ________________ Q coffee = _____________
4. Using your answer to #2 and #3, draw Sam’s demand curve for coffee. You may use an excel
graph and insert if you choose. (please make sure you label the axis)
The following table contains information about the utility Sam derives from donuts and coffee.
Complete the table by calculating the Marginal Utility (MU)
DONUTS
Q
0
COFFE
Total Utility (TU) Marginal Utility (MU)
0
Q
0
Total Utility (TU)
0
_________
1
20
______
1
50
_________
2
50
______
2
90
_________
3
70
______
3
120
__________
4
85
_____
4
130
_________
5
90
______
5
135
_________
6
92
MU
______
6
139
1. Diminishing marginal utility first occurs for Sam with which unit of donuts? ________ which unit
of coffee? _______________
2. If the price of donuts is $1 each, the price of coffee is $2 each, and Sam has $10 to spend, how
many donuts and how many coffees must Sam buy to maximize his total utility?
Q donuts = __________________ Q coffee = _________________
3. If the price of coffee falls to $1, while the price of donuts stays at $1, and Sam’s income stays at
$10 how many donuts and how many coffees does Sam buy if he wants to maximize his total
utility now?
Q donuts = ________________ Q coffee = _____________
4. Using your answer to #2 and #3, draw Sam’s demand curve for coffee. You may use an excel
graph and insert if you choose. (please make sure you label the axis)
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Solution: ECO 2023 - The following table contains information about the utility Sam derives