Question

Anna consumes two goods: cricket games and fries. Her income is $60, the price of cricket games is
$20, and the price of a serving of fries is $10. Consider this table of marginal utilities:
Quantity MU from cricket
games

MU from fries

1 200 100
2 150 75
3 100 50
4 50 20
5 25 10
6 20 5

a) Complete the table above. [2 marks]

b) What is the Anna’s opportunity cost of going to a cricket game? [2 marks]

c) Suppose that you consumed 1 football game and 4 servings of fries. Why is this not the
equilibrium? [3 marks]

d) What is the equilibrium?

Answer 1

a)

b) $10

c)

$$20+4\times 10=60$$

but

$$\frac {MU_x}{p_x}=10$$

$$\frac {MU_y}{p_y}=2$$

d)

$$20x+10y=60$$

$$\frac {MU_x}{p_x}=\frac {MU_y}{p_y}$$

x=2, y=2