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

    sviato

    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?
     

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