Answer to Question #283195 in Microeconomics for Faizi

Question

Max enjoys windsurfing and snorkelling. He obtains the following utility from each of these sports: Hours Utility from Utility from per day windsurfing snorkelling 1 120 40 2 220 76 3 300 106 4 360 128 5 400 140 6 412 150 7 422 158 Max has a35 to spend and he can spend as much time as he likes on his leisure pursuits. Windsurfing equipment rents for a10 an hour, and snorkelling equipment rents for a5 an hour. a Draw a graph that shows Max’s budget line. b How long does he spend windsurfing and how long does he spend snorkelling?

Answer 1

Solution:

a.). Budget line: I = PxX + PyY

35 = 10X + 5Y

Max’s budget line is as below:

 

b.). Max will spend 6 hours windsurfing and 5 hours Snorkelling.

 

At this point, the marginal utility of windsurfing is equal to the marginal utility of snorkeling while spending the total amount of a35.

This is depicted by the below table: