Homework 5(ch6)

# Homework 5(ch6) - Homework 5(CH6 Questions 5 7 13 15 and 17...

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Homework 5: (CH6 , Questions : 5, 7, 13, 15 and 17) 5) 7)

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13) Thomas should spend his \$48 on 5 nights of bowling (\$40 spent on bowling) and 2 nights of billiards (\$8 spent in billiards). The total utility form 5 nights of bowling equals (56 + 48 + 40 + 32 + 24) = 200. The total utility from 2 nights of billiards equals (16 + 12) = 28. So, the total utility from 5 nights of bowling and 2 nights of billiards equals (200 + 28) = 228. This is the maximum utility Thomas can receive with his \$48. This is verified by the utility maximizing rule. The marginal utility per dollar of the fifth night of bowling is 24/8 = 3, and the marginal utility of the second night of billiards is 12/4 = 3. 15) In the product market for a normal good, a price decrease leads to a higher quantity demanded because the income effect of a price decrease makes a household better off, with extra income to spend on additional units of the product, and the substitution effect of a price decrease makes a household better off because the product becomes relatively cheaper
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Homework 5(ch6) - Homework 5(CH6 Questions 5 7 13 15 and 17...

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