Given the table of marginal utilities for CD's and century books, calculate the optimal quantity and total utility at equilibrium.
|
Quantity per month
|
MU classical cd's
|
MU 18th century books
|
|
1
|
90
|
120
|
|
2
|
20
|
16
|
|
3
|
16
|
12
|
|
4
|
12
|
4
|
|
5
|
8
|
2
|
a) She spends $75 per month. Cd is $15 and books are $15. How many cds and books can she buy each month.
b) Suppose she got a raise and spends an additional $30 a month. How many will she buy each month?
|
Quantity per month
|
MU classical cds
|
TU classical cds
|
MU 18th century books
|
TU 18th century books
|
|
1
|
90
|
|
120
|
|
|
2
|
20
|
|
16
|
|
|
3
|
16
|
|
12
|
|
|
4
|
12
|
|
4
|
|
|
5
|
8
|
|
2
|
|
c) Finish the Table. MU-marginal utility; TU- total utility
d) What is Sarah's total utility at equilibrium?
e) Draw Sarah's budget line for part a and her budget line for part b on the same graph.
f) On the same graph show how sarahs utility changed from part a to part b using indifference curves.