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Chapter 20: Q.22 (page 453)

At the optimal quantities of digital apps and portable power banks determined in your answer to Problem 20-21, after rounding to the nearest 10 cents, is the $ 26 income all spent at the new consumer optimum?

Short Answer

Expert verified

Yes, all income is spent at the new consumer's optimum

Step by step solution

01

Given Information

Marginal utility is the additional fulfilment a shopper gets from having another unit of a decent or administration. The idea of marginal utility is utilized by financial analysts to decide the amount of a thing buyers will buy. The law of decreasing marginal utility is frequently used to legitimize moderate charges.

02

Explanation

We know,

Marginal Utility=Change in No. of Units Consumed(ΔTU)Change in Total Utility(ΔQ)

The total spending is,

Totalspending=D×Pd+P×Pp

=3×$5.97+3×$2.70=$26

hence all income is spent at the new consumer's optimum as total spending = total income.

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Most popular questions from this chapter

Take a look at Table 20-1. Suppose that the price of each digital app rises to \( 5.97. At the same time, the price of each portable power bank falls to \) 2.70. Income remains unchanged at $ 26. Rework the marginal-utility-per-dollars-spent columns and round each amount to the nearest one-tenth. What are the quantities of digital apps and portable power banks now purchased by this consumer?

Illustrate Sue's new budget constraint and indifference curve in a diagram from the data in Problem F-3. Illustrate also the utility-maximizing combination of goods.

At a consumer optimum involving goods Xand Y, the marginal utility of good Xequals 3 utils. The price of good Yis three times the price of good X. What is the marginal utility of goodY?

Your classmate tells you that he is indifferent between three soft drinks and two hamburgers or two soft drinks and three hamburgers.

a. Draw a rough diagram of an indifference curve containing your classmate's consumption choices.

b. Suppose that your classmate states that he is also indifferent between two soft drinks and three hamburgers or one soft drink and four hamburgers, but that he prefers three soft drinks and two hamburgers to one soft drink and four hamburgers. Use your diagram from part (a) to reason out whether he can have these preferences.

The marginal utility that an individual would experience if she were to consume the first unit of a digital app is 15 utils, and the marginal utility that she would experience if she were to consume a second unit is 18 utils. If one app is the amount that the individual decides to consume, what is the person's total utility?
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