Answer to Question #299631 in Microeconomics for MAKGOROMETSA

Question

1.1 Kagiso has R30 to spend on sugar and salt. Kagiso’s marginal utilities from sugar and salt are shown in the following table. Quantity of sugar MU Quantity of salt MU 1 20 1 40 2 12 2 20 3 9 3 9 4 5 4 7 5 3 5 5 6 1 6 3 i. Suppose that a unit of sugar is priced at R5 and the price of a unit of salt is R10. Compute the weighted marginal-utility for sugar and salt and enter these values in the table. [04] ii. Given Kagiso’s R30 budget, how many units of sugar and salt will be purchased? Explain how you arrived at this answer. [02] iii. Suppose the price of salt stays constant at R10 and the price of sugar falls to R3. How many units of sugar will be demanded at this price? Carefully explain your reasoning. [03] iv. Draw Kagiso’s demand curve for sugar. Does it conform to the law of demand? Why? [02

Answer 1

1,2 of sugar and 1,2 salt will be purchased

the price of sugar falls to R3. 1,2 of sugar will be demanded at this price

conform to the law of demand

it conform to the law of demand, utility decreases with consumption