Answer to Question #217506 in Microeconomics for Adekunle

Question

1. An orange cost #5 and an apple cost #10. The first orange consumed by musa yielded marginal utility (MU) of 55 utils and at every subsequent consumption of an orange, the marginal utility (MU) diminishes by 5 utils while the first apple consumed by him yielded 80 utils and at every subsequent consumption marginal utility (MU) diminishes by 10 utils. 

A. Present this in a marginal utility (MU) schedule to the fifth orange and apple purchased.

B. How many oranges and apple will he buy in order to maximize his utility?

C. How much will he spend on the fruits? 

D. What should he do if his marginal utility (MU) of orange is 35 utils

Answer 1

 Orange Price= 5

🍎 Apple Price= 10

MU of first Orange= 55 utiles

And diminishes subsequently by 5 utiles

MU of first Apple = 80 utiles

And diminishes subsequently by 10 utiles.

A.

                        Marginal utility schedule

Oranges Apples MU for Oranges MU for Apples   
1        1          55              80
2        2          50              70                
3        3          45              60
4        4          40              50
5        5          35              40

B.

Let MU of Orange be; MU_x and it's price P_x

MU of Apple be; MU_y and it's price P_y

Utility maximization occurs when;

MU_x/P_x=MU_y/P_y

The combination that satisfies the maximum utility condition is;

When number of Oranges= 4 and when number of Apples =1, that is,

40/5=80/10 which gives 8

Therefore, number of Oranges= 4

Number of Apples= 1

C. Amount He will spend on fruits;

=(4*5)+(1*10)

=20+10

=30

D.

If the MU of Orange was 35 utiles, he would increase the number of Apples to consume and decrease the the number of Oranges to consume.