AB224_KristiStrout_Unit4Assignment.docx

# This means that she should consume more chicken

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marginal utility per dollar on the last order of the chicken sandwiches. This means that she should consume more chicken sandwiches and less fries/ c. If Jane is not maximizing her utility with the original purchase combination, remembering the Law of Diminishing Marginal Utility, would she be better off buying just one more fry? Explain your reasoning and show any calculations. As previously stated, Jane is receiving more utility per dollar from the chicken sandwiches than from the fries. If she were to eat one more order of fries than she might not be getting any additional utility. (Her previous marginal utility per dollar from the last order of fries was only 3). This shoes she would be far more worse off if she bought one more order of fries. d. If Jane is not maximizing her utility with the original purchase, remembering the Law of Diminishing Marginal Utility, would she be better off buying one less fries and one more chicken sandwich? Explain your reasoning and show any calculations. Yes she would be better off buying one less order of fries and one more order of the chicken sandwiches because her marginal utility per dollar spent on the last order of chicken sandwiches, which is 15, is more than the marginal utility per dollar spent on the last order of fries, which is 3. v.6.16.17 3 of 5

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Unit 4 AB224 | Microeconomics 2. Remembering the Learning Practice in Unit 3, in the year 107 WBCE (Way Before the Common Era) the Gondwanaland Chairman of Production reported that the gosum berry growers were able to meet an average demand of 700 barrels of gosum berries per month at an average a price of \$70 per barrel. In the year 108 WBCE the growers were plagued with a gosum berry bug infestation that reduced average output, causing production to fall to only 600 barrels per month, causing the price to rise to \$84 per barrel. The following table shows the Chairman’s report: Year (WBCE) Monthly barrels of gosum berries demanded Price per barrel 107 700 \$70 108 600 \$84 a. Using the midpoint method, calculate the price elasticity of demand for Gondwanaland gosum berries. Explain what this price elasticity of demand means? 600-700/(600+700) = 2/84-70/(84+70)/2-100/650 = 14/77 = -(100x77)/650x14 = -.85 so the price elasticity of demand is .85. The price elasticity of demand refers to the relationship between the changes in quantity demanded and changes in price of particular goods. It represents the responsiveness of demand of particular goods to its price over a time period. b. What is the monthly average total revenue for year 107, and the monthly average total revenue for year 108? How do these numbers compare to each other?
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