ec-7 - E201 Spring 2009 Homework #4 Answers The questions...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
E201 Spring 2009 Homework #4 Answers The questions below draw from the material in the reading on Marginal Utility Analysis (at ereserves ( . Password is water. Like other problem sets, I encourage you to work on these problems in a small group, but the answers you hand in must be your own. 1. Complete the following table: Units TU X MU X MU X /PX TU Y MU Y MU Y /P Y 1 10 10 5 5 5 1.67 2 17 7 3.5 9 4 1.33 3 20 3 1.5 12 3 1 4 22 2 1 14 2 0.67 5 23 1 0.5 15 1 0.33 a. Suppose that the consumer has $17.00 income to spend on two goods, X and Y. If the price of X is $2 per unit and the price of Y is $3, which good does this consumer purchase first? Why? Buy X first, because X has higher MU per dollar. b. How much of X and Y will the consumer purchase if all income is spent? 4X and 3Y for a total of $17 spent. c. Suppose the price of X rises from $2 to $4, other things constant. How much of X and Y will be purchased? The MU
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/19/2011 for the course ECON 200 taught by Professor Staff during the Winter '09 term at Indiana.

Page1 / 2

ec-7 - E201 Spring 2009 Homework #4 Answers The questions...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online