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Law of diminishing marginal utility

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Reference no: EM131074721

The below table gives the total utility Jamal derives from the consumption of coffee  and cream puffs. Jamal has $12 to spend on these two confectionery goods. The price of a coffee is $3 and the price of a cream puff is $1.50

a) Complete the table

         Coffee                                                                              Cream puffs

Quantity

TU

MU

(MU/P)

Quantity

TU

MU

(MU/P)

0

        0

 

 

0

       0

 

 

1

126

 

 

1

  54.0

 

 

2

243

 

 

2

103.5

 

 

3

342

 

 

3

145.5

 

 

4

414

 

 

4

177.0

 

 

5

441

 

 

5

196.5

 

 

b) Does this follow the Law of diminishing marginal utility? Explain why?

c) What is your optimal combination of coffee and cream puffs?

Reference no: EM131074721

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