Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. Lauren likes the combination of Larry's Pizza and Dr. Pepper (soda) for dinner. When the price of a soda is $2 per unit and

2. Lauren likes the combination of Larry's Pizza and Dr. Pepper (soda) for dinner. When the price of a soda is $2 per unit and the price of a slice of pizza is $3, Lauren tries to maximize her satisfaction by consuming various units of soda and pizzas. The table below show you total utility of soda and pizza at different units.

Table 1. Total Utility (TU) and Marginal Utility (MU) of Pizza and Soda

Unit of Soda TU (Soda) MU (Soda) Unit of Pizza TU (Pizza) MU (Pizza)
1 100 100 1 300 300
2 180 80 2 540 240
3 240 60 3 720 180
4 280 40 4 840 120
5 310 30 5 900 60
6 330 20 6 900 0

(1) Fill the two columns of marginal utility (MU) of soda and pizza.

(2) When Lauren maximizes her satisfaction with 4 sodas ($2 each), how many pizzas she should purchase at $3 each slide?

(3) If the price of pizza increases to $6 per slide, ceteris paribus, how may slides of pizzas should she purchase to maximize her total satisfaction?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Sociology Of Economic Innovation

Authors: Francesco Ramella

1st Edition

1317621344, 9781317621348

More Books

Students also viewed these Economics questions