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Tidy Tidy
wrote...
Posts: 9704
6 years ago
Lilly Davis has $5 per week to spend on any combination of ice cream and candy. The price of an ice cream cone is $2 and the price of a candy bar is $1. The table below shows Lilly's utility values. Use the table to answer the questions that follow the table.

Quantity of Ice Cream Cones   Total Utility   Marginal Utility   Marginal Utility per Dollar   Quantity of Candy   Total Utility   Marginal Utility
1   20         1   20   
2   38         2   38   
3   52         3   48   
4   62         4   54   

a.   Complete the table by filling in the blank spaces.
b.   Suppose Lilly purchases 2 ice cream cones and 1 candy bar. Is she consuming the optimal consumption bundle? If so, explain why. If not, what combination should she buy and why?
Textbook 

Essentials of Economics


Edition: 4th
Authors:
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8 Replies
Repeat after me: 'Calm down. Things are gonna be fine. Things are gonna be all great. Just relax.' Wink Face
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Answer verified by a subject expert
Chimelo46Chimelo46
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Top Poster
Posts: 5639
6 years ago
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More questions for this book are available here
a.
Quantity of Ice Cream Cones   Total Utility   Marginal Utility   Marginal Utility per Dollar   Quantity of Candy   Total Utility   Marginal Utility
1   20   20   10   1   20   20
2   38   18    9   2   38   18
3   52   14     7   3   48   10
4   62   10     5   4   54     6

b.   If Lilly purchases 2 ice cream cones and 1 candy bar she is not maximizing her utility. The marginal utility per dollar spent on ice cream cones = 9 and marginal utility per dollar spent on candy bars = 20. Her total utility from this bundle is 58 utils. If she buys 1 ice cream cone and 3 candy bars, she will equate her marginal utilities per dollar and the total utility from this bundle = 68.
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wrote...
6 years ago
I found this question very tricky (not sure why). Thanks for confirming my initial thoughts on it. I will mark this topic solved now.
Repeat after me: 'Calm down. Things are gonna be fine. Things are gonna be all great. Just relax.' Wink Face
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6 years ago
Happy to assist!
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A year ago
thank you
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A year ago
Thanks you
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8 months ago
Thanks!
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7 months ago
Thanks
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A month ago
Thanks!
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