Question

Instead of a graphing activity, this week we will do a practice problem. Use the details below to find the optimal consumption bundle: how many hot dogs and how many drinks will maximize utility for $10 in spending?

Income=$10    Price of a hot dog= $2   Price of a drink= $1

Hot Dogs	MU hot dog	MU/P	Drinks	MU drink	MU/P
1	20		1	20
2	16		2	15
3	10		3	10
4	6		4	5
5	3		5	3
6	2		6	-1

1. Copy and past the table above into your own file, enter the values, write up your answers, and save the file for uploading your answer.
2. Calculate the marginal utility per dollar for each unit of each item.
3. Determine how the $10 should be spent to maximize utility. How many hot dogs will you buy? How many drinks?
4. What is the total utility from hot dogs?
5. What is the total utility from drinks?
6. What is the combined total utility from your purchases?

Answer 1