Answer to Question #317012 in Microeconomics for Xina

Question

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]

Answer 1

Solution

The utility of salt and sugar decreases to R3 so at to conform to the law of demand.

1,2 of sugar and 1,2 of salt will be purchased at this price