Suppose that as a consumer you have $34 per month to spend for munchies, either on...

 

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Suppose that as a consumer you have $34 per month to spend for munchies, either on pizzas which cost $6 each or on twinkies which cost $4 each. Suppose further that your preferences are given by the following total utility table. Count 3 4 6. TU for Pizza 60 108 138 156 162 166 166 TU for Twinkies 44 76 100 120 136 148 152 Should you purchase a twinkie first or a pizza first to get the "biggest bang for the buck"? How can you tell? (Hint: use the utility maximizing rule.) What should you purchase? Page 1 of 2 Assignment Next, use the utility maximizing rule to identify the consumer equilibrium, that is, what combination of twinkies and pizzas will maximize your total utility. (Hint: What should you purchase second, third, etc. until you exhaust your budget?) Confirm that the consumer equilibrium generates the highest combined total utility of any affordable combination of goods. E.g., compute the total utility of some other affordable combinations of twinkies & pizzas and compare with the consumer equilibrium. Suppose that as a consumer you have $34 per month to spend for munchies, either on pizzas which cost $6 each or on twinkies which cost $4 each. Suppose further that your preferences are given by the following total utility table. Count 3 4 6. TU for Pizza 60 108 138 156 162 166 166 TU for Twinkies 44 76 100 120 136 148 152 Should you purchase a twinkie first or a pizza first to get the "biggest bang for the buck"? How can you tell? (Hint: use the utility maximizing rule.) What should you purchase? Page 1 of 2 Assignment Next, use the utility maximizing rule to identify the consumer equilibrium, that is, what combination of twinkies and pizzas will maximize your total utility. (Hint: What should you purchase second, third, etc. until you exhaust your budget?) Confirm that the consumer equilibrium generates the highest combined total utility of any affordable combination of goods. E.g., compute the total utility of some other affordable combinations of twinkies & pizzas and compare with the consumer equilibrium.

Answer rating: 100% (QA)

Count TU Pizza MUP Pizza TU Twinkies MUP Twinkies 1 60 10 44 1... View the full answer