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Econ190%20HW4 - Economics 190 Homework Set#4 Due October 7...

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Economics 190 Homework Set #4 Due : October 7, 2007 at midnight Instructions : Answer the following questions to your best ability. Please show all work and be sure to label all axes and curve and show numerical intercepts and intersections wherever possible. Partial credit will be given where appropriate. 1. Use the accompanying table below that contains data on Erika’s total utility (TU) from her consumption of Goods J, K, and L to answer subparts (a) through (d). Good J Good K Good L Quantity TU J MU J MU J /P J TU K MU K MU K /P K TU L MU L MU L /P L 0 0 ---- ---- 0 ---- ---- 0 ---- ---- 1 14 30 40 2 26 54 76 3 36 72 108 4 44 84 136 5 50 90 160 6 54 90 180 7 56 84 196 8 56 72 208 9 54 54 216 (a) Calculate the marginal utilities for Goods J, K, and L (record your answers in the table above). (b) Given that P J = $2, P K = $6, and P L = $16, calculate the ratio of marginal utility to price for all three goods (record your answers in the table above). (c) Assume that Erika has $88 to spend. Apply the rational spending rule (locate the combinations of J, K, and L where the extra utility from the last dollar spent is equal for all three goods).
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