Handout 2 - Handout 2 1.From the total utility schedule...

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Handout 2 1.From the total utility schedule shown below, calculate the marginal utility of each additional unit of X consumed. Units of X 1 2 3 4 5 6 7 8 Utility 15 35 50 62 70 74 76 77 2. Suppose a consumer’s utility derived from consuming bananas is described by the function U 10 X 3 X 2 – (1/3) X 3 . Use the derivative formula found in Equation 4A.1 to compute marginal utility. a. Make a table showing marginal utility for X from 1 to 7 units. b. Would this individual ever choose to consume more than 7 units? Explain. 3. What information is contained in the slope of an indifference curve? Why are these curves typically convex to the origin? 4. For each of the utility functions below, draw a set of indifference curves showing utility levels U 12, U 16, and U 24. a. U XY b. U X Y c. U X Y d. What is true about the commodities in (b)? e. What about the commodities in (c)? 5. Suppose a consumer has an income of $500 and faces prices p X 5 and p Z 10.
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  • Winter '07
  • JUZWIAK,WILLIAM
  • Utility

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