Maria Beirouri

20180107

Homework no. 4

1) 1. A 6. C 11. D
2. D 7. D 12. B
3. C 8. D 13. A
4. D 9. B
5. A 10. A

2)
Units Consumed Total Utility Marginal Utility
0 0 -
1 10 10
2 18 8
3 25 7
4 30 5
5 33 3
6 34 1

a. A decreasing rate, because marginal utility is declining (decreasing).

b. I disagree since the fact that the first unit gives us the highest marginal utility does
not mean that we will buy only the first unit, as it depends on the price of the good
sold.

3) Income = $9
Price of x = $2
Price of y = $1

Units of x MUx MU / P Units of y MUy MU / P

1 10 5 1 8 8
2 8 4 2 7 7
3 6 3 3 6 6
 4 4 2 4 5 5
5 3 1.5 5 4 4
6 2 1 6 3 3

Income ¿ P ( x ) ×Q ( x )+ P ( y ) ×Q ( y )
¿ ( 2 ×1 ) +(1 × 4)
=2+4=6

Income ¿ ( 2 ×2 ) +(1 ×5)

=4+5=9

Income ¿ ( 2 ×3 ) +(1× 6)
= 6 + 6 = 12

So:
Buy 2 units of x and 5 units of y
Total Utility (x) = 10 + 8 + 6 + 4 + 3 + 2 = 33
Total Utility (y) = 8 + 7 + 6 + 5 + 4 + 3 = 33

4) 1. Characteristics of Indifference curves:

 Every indifference curve to the right represents a higher level of satisfaction.
 They cannot intersect each other.
 They will not touch the axis.
 They are convex to the origin.

2. 40 / 10 = 4 commodities

3.
A. Marginal Utility: is the additional satisfaction from consumption of one more
unit of goods or services.
B. Consumer Equilibrium: is a situation in which a person gets maximum
satisfaction.