Answer to Question #267552 in Economics of Enterprise for RAHEL

Question

Given the utility fucntion , derive average and marginal utility functions, Find the value of X at which total utility is maximum, and the value of X at which average utility is maximinum

Answer 1

Marginal utility is defined ad the added satisfaction being derived by a consumer from consumption of one more unit of a service or good. It could be calculated as:

=total utility difference / quantity of goods difference

=total utility difference / quantity of goods difference

The rule of Utility Maximization states that consumers tend to allocate their incomes of money such that the last dollar being spent on each of the products being purchased in turn yields the same of extra marginal utility. It could be calculated as:

MU of product A

Price of A

=MU of product B

Price of B