# Help with microeconomics marginal utility

Discussion in 'Community Discussion' started by grantdh, Jul 29, 2012.

1. ### grantdh macrumors newbie

Joined:
Jul 29, 2012
#1
Hi all, Im having trouble with a question in my microeconomics class I find I can understand things a little better if I see them in an equation but I don't think I'm doing it right

How can I set this question up as an inequality equation? Each week, Tom Wu buys two hamburgers at \$2 each, eight cokes at \$0.50 each, and eight slices of Pizza at \$1 each, but he buys no hot-dogs at \$1.50 each. What can you deduce about Toms marginal utility for each of the four goods? How can I set this question up as an equation? When I set it up using the fundamental condition of consumer equilibrium(MU_1/P_1 = MU_2/P_2 = MU_3/P_3 = ....... = MU per \$ of income) I got that hotdogs have a higher utility than hamburgers and I know thats not right(MU_ham/\$2 = MU_coke/\$0.50 = MU_pizza/\$1 = MU_hot/\$1.50 then I multiplied everything by \$2 to deal with the fractions I think that was my first mistake). If I look at it intuitively I see that MUpizza > MUcoke = MU hamburger > MUhotdog Is that right?

2. ### sviato macrumors 68020

Joined:
Oct 27, 2010
Location:
HR 9038 A
#2
lol let's see how well I remember eco100...

Let MU=Marginal Utility; P=Price; h=hamburger; c=coke; p=pizza; hotdogs are irrelevant since Tom has a preference against hotdogs.

(MUh/Ph) = (MUc/Pc) = (MUp/Pp) -> (1/2) = (1/0.5) = (1/1)

[make same denominator] -> (1/2) = (4/2) = (2/2)

Therefore Tom would need to buy 4 cokes or 2 pizzas to get the same utility as he would from 1 hamburger - hamburgers give the most utility.

So MUh > MUp > MUc > MU(hotdog).

Hope it's right, it's been 3 years since I took the course, goodluck!

3. ### .JahJahwarrior. macrumors 6502

Joined:
Jan 1, 2007
#3

Assuming the consumer Tom Wu is rational, then he has maximized utility with this bundle of items. If utility is maximized, then marginal utility is 0.

Can you post a picture or scan of the problem?