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4. Deriving demand from a marginal utility table with two goods Poornima has a $10 snack budget that she uses to buy chips and granola.
4. Deriving demand from a marginal utility table with two goods Poornima has a $10 snack budget that she uses to buy chips and granola. Assume the price of chips (Pc) is fixed at $2. Table A shows Poornima's marginal utility (MU) and marginal utility per dollar ( -) she receives from the first through fifth bags of chips she buys each week. Table B shows the same information for granola when the price of a bag of granola (PG) is either $4 or $2. Assume that Poornima is a rational consumer who wants to maximize her utility. Table A Chips MU MU/P (Bags) (Utils) (If P=2) 0 30 15 24 12 20 10 W 14 7 6 3Table B Granola Ml] HUIP {3595) (UH-'5} (If 132.54} {If P=$2} U 4'] 10 20 1 32 3 15 2 24 6 12 3 15 4 B 4 4 1 2 5 If the price of a bag of granola is $4, the price of a bag of chips is $2, and Poornima spends her entire budget of $10, she will choose to buy 7 of chips and v ofgranola. NOW, suppose that granola goes on sale. and its price decreases to $2. Poomima's ulity is now maximized if she buys V of chips and v of granola. Suppose the price of chips is xed at $2, and Poomima's budget is xed at $10.
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