Answer to Question #308178 in Microeconomics for felege

Question

2. Suppose the consumer consume good t&S and get the utility 𝑠 1 4 𝑡 3 4 and the consumer spent his total income birr 300 to purchase good t at price = 10 birr &S at price=20 birr per unit. Then based on the above information answer the following questions. A. Calculate the utility maximizing level of consumption of good t&S? (1 point) B. Calculate marginal utility of t at utility maximizing level of consumption of good t&S level and interpret it? (2 points) C. Calculate MRSst at utility maximizing level of consumption of good t&S level and interpret it? (2 points) D. Show the result in graph? (1 point

Answer 1

a)

$\frac {MU_t}{P_t}=\frac {34}{10}$

$=3.4$

b)

$\frac {MU_s}{P_s}=\frac {14}{20}$

$=0.7$

c)

Hence, the consumer is not at the optimal position at 10 units of t and 20 units of s.

d)