Optimal quantity and total utility at equilibrium

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Reference no: EM1316064

Given the table of marginal utilities for CD's and century books, calculate the optimal quantity and total utility at equilibrium.

Quantity per month	MU classical cd's	MU 18^th century books
1	90	120
2	20	16
3	16	12
4	12	4
5	8	2

a) She spends $75 per month. Cd is $15 and books are $15. How many cds and books can she buy each month.

b) Suppose she got a raise and spends an additional $30 a month. How many will she buy each month?

Quantity per month	MU classical cds	TU classical cds	MU 18^th century books	TU 18^th century books
1	90		120
2	20		16
3	16		12
4	12		4
5	8		2

c) Finish the Table. MU-marginal utility; TU- total utility

d) What is Sarah's total utility at equilibrium?

e) Draw Sarah's budget line for part a and her budget line for part b on the same graph.

f) On the same graph show how sarahs utility changed from part a to part b using indifference curves.

Reference no: EM1316064

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