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The following is a table showing Dana's marginal benet from purchasing bottles of water and good X from a grocery store. Quantity of Marginal Benet
The following is a table showing Dana's marginal benet from purchasing bottles of water and good X from a grocery store. Quantity of Marginal Benet Quantity of Marginal Benefit Water of Water Good X of Good X (in bottles) (in dollars) (in units) (in dllal'h') (a) What is Dana's total benefit from purchasing 2 bottles of water and l unit of good X? Show your work. (b) Assume the price of a unit of good X is $5. Calculate the total consumer surplus if Dana purchases 3 units of good X. Show your work. (c) Now assume the price of a bottle of water is $3 and the price ofa unit of good X is $6. Dana spends her entire budget of$30 on bottles of water and good X. (i) Explain why Dana does not maximize her benet when she purchases 2 bottles of water and 4 units of good X. Use marginal analysis to explain your answer. (ii) What are the optimal quantities of good X and bottles of water at these prices? (iii) Suppose the price of a unit of good X drops to $3. Calculate Dana's cross-price elasticity of demand for bottles of water with respect to the price of good X, and state whether the two goods are substitutes or complements. Show your work
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