You are consuming 2 goods: good A and good B
The price of good A=$1 and the Price of good B = $2
Your budget is $10
Using the appropriate information answer the questions below
Number of units MUaMU B
First10 24
Second 820
Third 718
Fourth 616
Fifth 512
Sixth 4 6
Seventh 3 4
How many units of A and B should you purchase?_____
What is the maximum TU (total utility) can you get from your budget of $10 _____________
If you were to trade the last unit of B (at $2 per unit) for 2 units of A (at $1 per unit), how large would your TU be?______
If your income is raised to $14, how many units of A and of B should you consume?_____________
What will be your TU from the $14 income?_________
If you were to trade the last unit of B (at income of $14) for 2 units of A instead, what would be your TU?_____________
Sample Solution