1. 2002
Microeconomics
Question 3

2. Quantity Total utility Quantity Total utility 0 0 0 0 1 20 1 30
The table below shows total utility in utils that a utility-maximizing consumer receives from consuming two goods: apples and oranges.
Apples Oranges
Quantity Total utility Quantity Total utility

3. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$2
> 30 15
> 20 20 15 15
> 20 10
>
> 10 10
> 15
7.5
> 5 5
> 10 5
> 2 2
> 5
2.5
Assume that apples cost $1 each, oranges cost $2 each, and the consumer spends the entire income of $7 on apples and oranges.
Using the concept of marginal utility per dollar spent,
identify the combination of apples and oranges the
consumer will purchase. Explain your reasoning.

4. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$2
> 30 15
> 20 20 15 15
> 20 10
>
> 10 10
> 15
7.5
> 5 5
> 10 5
> 2 2
> 5
2.5
Using the concept of marginal utility per dollar spent,
identify the combination of apples and oranges the
consumer will purchase. Explain your reasoning.
The consumer will purchase 3 apples and 2 oranges
because this is where the Mu/per dollar is equal and
where the consumer maximizes satisfaction for a total
utility of 95.
(Maximum utility answer is not good enough.)

5. Finished
The question continues if you want more!

6. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$2
> 30 15
> 20 20 15 15
> 20 10
>
> 10 10
> 15
7.5
> 5 5
> 10 5
> 2 2
> 5
2.5
With the prices of apples and oranges remaining
constant (apples $1, oranges $2), assume that the
consumer’s income increases to $12. Identify each of
the following.
4 apples and 4 oranges because that is where
Mu/per dollar is equal.
The combination of apples and oranges the
consumer will now purchase.

7. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$2
> 30 15
> 20 20 15 15
> 20 10
>
> 10 10
> 15
7.5
> 5 5
> 10 5
> 2 2
> 5
2.5
With the prices of apples and oranges remaining
constant (apples $1, oranges $2), assume that the
consumer’s income increases to $12. Identify each of
the following.
4 apples and 4 oranges because that is where
Mu/per dollar is equal.
The total utility the consumer will receive from consuming the combination in (i)
= 125 utils

8. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$4
> 30
7.5
> 20 20 15 15
> 20 5
>
> 10 10
> 15
3.75
> 5 5
> 10
2.5
> 2 2
> 5
1.25
(c ) With income remaining at $12, assume the price of
oranges increases to $4 each (apples remain at $1
each). Identify each of the following.
The combination of apples and oranges the
consumer will now purchase.
4 apples and 2 oranges

9. > Apples Total Oranges Total Quantity utility Quantity utility Mu Mu
Mu/$1
Mu/$4
> 30
7.5
> 20 20 15 15
> 20 5
>
> 10 10
> 15
3.75
> 5 5
> 10
2.5
> 2 2
> 5
1.25
(c ) With income remaining at $12, assume the price of
oranges increases to $4 each (apples remain at $1
each). Identify each of the following.
4 apples and 2 oranges
The total utility the consumer will receive from consuming the combination in (i)
= 100 utils