Question

10.       The Table below shows the Total Utility (TU) and Marginal Utility (MU) derived from the consumption of 10 units of the commodities X and Y.

a. Derive a column for the Marginal Utility of x (MU_x), and a column for the Total Utility of y (TU_y).

                        b. On separate graphs, plot the Total and Marginal curves for each commodity, placing the panel of the marginal utility curve below the panel for the total                                          utility curve for each commodity.

                        c. Determine at what unit of each commodity a consumer reaches the point of saturation, and mark it on both the table and graph for each.

                        d. Describe the behavior of both curves for each commodity based on your observations of the slopes.

                        e. At what unit a consumer reaches equilibrium if he buys both commodities when their prices are:

                       

                                                P_x = $2 and P_y = $1.

                       

                        f. What must be the consumer budget, which he spends entirely on the two commodities?

Q	TUx	MUx	TUy	MUy
0	0			0
1	7			4
2	13			10
3	18			8
4	22			6
5	25			4
6	27			2
7	27			0
8	26			-1
9	25			-2
10	23			-3

Answer 1

Q	TUx	MUx	TUy	MUy
0	0	0	0	0
1	7	7	4	4
2	13	6	14	10
3	18	5	22	8
4	22	4	28	6
5	25	3	32	4
6	27	2	34	2
7	27	0	34	0
8	26	-1	33	-1
9	25	-1	31	-2
10	23	-2	28	-3

b. c. The consumer gets saturated when he does not want anymore of that good. At this point, marginal utility of that good is zero. This pint is reached when he consumes 7 units of X or units of Y.

d. Both goods are normal goods.

b.