Question
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?
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