At the optimal quantities of digital apps and wire- less earbuds determined in your answer to Problem 20-21, after rounding to the nearest 10 cents, is the $26 income all spent at the new consumer optimum?

Problem 20-21

Take a look at Table 20-1. Suppose that the price of each digital app rises to $5.97. At the same time, the price of each wireless earbud falls to $2.70. Income remains unchanged at $26. Rework the marginal-utility-per-dollars-spent columns and round each amount to the nearest one-tenth. What are the quantities of digital apps and wireless earbuds now purchased by this consumer?

Transcribed Image Text:

TABLE 20-1 (1) Digital Apps per Period 0 1 2 3 4 5 Total and Marginal Utility from Consuming Digital Apps and Wireless Earbuds on an Income of $26 (2) Total Utility of Digital Apps per Period (utils) 0 50.0 95.0 135.0 171.5 200.0 (3) Marginal Utility (utils) (MU) 50.0 45.0 40.0 36.5 28.5 (4) Marginal Utility per Dollar Spent (MUd/Pd) (price = $5) - 10.0 9.0 8.0 7.3 5.7 (5) Wireless Earbuds per Period 0 1 2345 N (6) Total Utility of Wireless Earbuds per Period (utils) 0 25 47 65 80 89 (7) Marginal Util- ity (utils) (MU) 25 22 18 15 9 (8) Marginal Utility per Dollar Spent (MU/Pe) (price = $3) 8.3 7.3 6.0 5.0 3.0