4. Use the following table to answer the questions below.Assume that income equals $50, the price of Good X equals $10, and the price of Good Y equals $10.

Quantity ofTotalUtilityQuantity ofMarginalUtility

Good Xof Good XGood Yof Good Y

1$1401$180

22602160

33603120

4440450

5500530

a.For both goods, calculate the TU, MU, and the MU/$.

b.Determine the optimal consumption bundle.

c.What's the amount of TU associated with the optimal bundle?

d.What's the value of "consumer surplus" that's associated with the optimal bundle?

e.Suppose the consumer receives an additional $20.What's the new optimal consumption bundle?

f.Is Good X considered a "normal" or "inferior" good?How do you know?

g.If the price of Good X increases to $20, what's the optimal consumption bundle, assuming income equals $50?

h.Given the information above, draw the demand curve for Good X.

5.Suppose Sam knows that the price of doughnuts is $3 and the price of cupcakes is $4.He believes that the next doughnut he consumes will increase his total utility by $6 and the next cupcake will increase his total utility by $10.Assuming he has enough money to buy either good, Sam should buy a doughnut next.Briefly justify your answer.

6.George has a weekly income of $50, which he uses to buy beer and Chipotle.The price of beer is $5 and the price of Chipotle is $7.50.Suppose George's income increases to $100 and the price of beer and Chipotle remains constant.Given this income change, one would expect George's budget line to shift to the right.Show this on a graph.

7.Are the following consumption bundles all on the same indifference curve: Bundle A - 4 enchiladas and 1 burrito; Bundle B - 3 enchiladas and 3 burritos; Bundle C - 2 enchiladas and 2 burritos?Justify your answer with a graph.

8.True or False.Henry and Anne have identical incomes.Both buy only sardines and ice cream.Since they face the same prices for the two goods, their optimal consumption bundles must be identical.

9.True or False.John spends his daily income of $15 on protein shakes (PS) and energy bars (EB).Protein shakes are priced at $5 each and energy bars at $3 each.If protein shakes are measured on the vertical axis, the slope of the budget line is -5 (negative five).

10.a.Draw a graph of a budget line with one indifference curve and indicate where the optimal

purchase occurs.Be sure to label your axes, and your lines.

b.Show on your graph what happens when the price of Good Y decreases.