Chapter 20: Q. 20.2- Learning objectives. (page 437)
Explain why an optimal choice of how much to consume entails equalizing the marginal utility per dollar spent across all items.
As a result, the marginal utility measures the rate at which consumption units are converted into utility units.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
At a consumer optimum, for all goods purchased, marginal utility per dollar spent is equalized. A high school student is deciding between attending Western State University and Eastern State University. The student cannot attend both universities simultancously. Both are fine universities, but the reputation of Western is slightly higher, as is the tuition. Use the rule of consumer optimum to explain how the student will go about deciding which university to attend.
Discuss why bounded rationality may prevent reaching a true consumer optimum.
What happened to the marginal utility derived from food consumption as people responded to lower food prices by purchasing more food?
Sue's monthly budget for bottled water and soft drinks is . The price of bottled water is per bottle, and the price of soft drinks isper bottle. Calculate the slope of Sue's budget constraint. Given this information and the information provided in Problem , find the combination of goods that satisfies Sue's utility-maximization problem in light of her budget constraint.
Your classmate tells you that he is indifferent between three soft drinks and two hamburgers or two soft drinks and three hamburgers.
a. Draw a rough diagram of an indifference curve containing your classmate's consumption choices.
b. Suppose that your classmate states that he is also indifferent between two soft drinks and three hamburgers or one soft drink and four hamburgers, but that he prefers three soft drinks and two hamburgers to one soft drink and four hamburgers. Use your diagram from part (a) to reason out whether he can have these preferences.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
