Help with microeconomics marginal utility

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

  1. grantdh macrumors newbie

    Jul 29, 2012
    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


    Oct 27, 2010
    HR 9038 A
    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

    Jan 1, 2007

    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?

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