QUESTION 2 (50 marks) Peter consumes both apple and orange. Table 2 below shows the average utility that he can derive for each quantity of apple or orange that he consumes. Table 2: Utility schedule Apple Orange Quantity Average Utility Quantity Average Utility 15 U D WN 10 w 13.5 12 11 10 a) If Peter intend to spend on RM12 on fruits and the price of apple and orange are RM1 and RM2 respectively. How many quantities of apples and oranges will he consume to maximize his utility within his budget? (15 marks) 2 Microeconomics (KEB2123) CONFIDENTIAL March 2020 Final Examination (Note: You are required to compute the marginal utility (MU) to price ratio for apple and orange to answer part a.) b ) If Peter's budget is reduced to RM9, what will be the quantities of apples and oranges that he will consume to maximize his utility given his new budget. Explain your answer. (5 marks) c) Figure 1 below shows the indifference curves and the budget lines of Sara. i. Identify the point, which Sara should be consuming to maximize her utility given her budget is represented by the budget line aa. Explain your answer. (5 mark) li. Under what situation Sara's budget line pivots inwards to ab? (5 mark) ii. Explain what is the difference between consuming at point A and point F. (10 mark) Iv. Based on Figure 1 above explain why higher income will yield higher utility. (10 mark)