Question

16. Suppose a particular consumer has 34 birrs to be spent on two goods, A and B. The unit price of good A is 2 birr and the unit price of B is 1 birr. The marginal utility (MU) she gets from consumption of the goods is given below
Quantity MUA MUB
1 48 30
2 36 20
3 28 15
4 24 10
5 20 5
6 16 1

a. Based on the cardinal analysis, what is the combination of the two goods that gives maximum utility to the consumer?
b. What is the total utility at the utility maximization level?

Answer 1

a.

the combination of goods at maximum utility is at 10 utils where the consumer can get 4 quantities of B and 5 quantities of A.

b

the total utility at utility maximization will be the total of total of utilities where the utils are equal and that is at 10 utils.

$\therefore 75 + 156 = 231$

the total utility is 231

$231utils$