Brenda likes to have bagels and coffee for breakfast. The accompanying table shows Brenda’s total utility from various consumption bundles of bagels and coffee.
Consumption Bundle | ||
---|---|---|
Quantity of Bagels |
Quantity of Coffee (cups) |
Total utility (utils) |
0 | 0 | 0 |
0 | 2 | 28 |
0 | 4 | 40 |
1 | 2 | 48 |
1 | 3 | 54 |
2 | 0 | 28 |
2 | 2 | 56 |
3 | 1 | 54 |
3 | 2 | 62 |
4 | 0 | 40 |
4 | 2 | 66 |
Suppose Brenda knows she will consume 2 cups of coffee for sure. However, she can choose to consume different quantities of bagels. She can choose either 0, 1, 2, 3, or 4 bagels.
Find Brenda’s total utility and calculate her marginal utility from bagels as she goes from consuming 0 bagel to 1 bagel, from 1 bagel to 2 bagels, from 2 bagels to 3 bagels, and from 3 bagels to 4 bagels. Assume she consumes two cups of coffee.
Quantity of Bagels | Quantity of Coffee (cups) | Total utility (utils) | Marginal utility (utils) |
---|---|---|---|
0 | 2 | --- | |
1 | 2 | ||
2 | 2 | ||
3 | 2 | ||
4 | 2 |
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Consumption Bundle | |||
---|---|---|---|
Quantity of Bagels | Quantity of Coffee (cups) |
Total utility (utils) |
Marginal utility (utils) |
0 | 2 | 28 | -- |
1 | 2 | 48 | 20 |
2 | 2 | 56 | 8 |
3 | 2 | 62 | 6 |
4 | 2 | 66 | 4 |
Using your table from part A, assume Brenda consumes two cups of coffee does her marginal utility exhibit returns.
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Consumption Bundle | |||
---|---|---|---|
Quantity of Bagels | Quantity of Coffee (cups) | Total utility (utils) | |
0 | 0 | 0 | |
0 | 2 | 28 | |
0 | 4 | 40 | |
1 | 2 | 48 | |
1 | 3 | 54 | |
2 | 0 | 28 | |
2 | 2 | 56 | |
3 | 1 | 54 | |
3 | 2 | 62 | |
4 | 0 | 40 | |
4 | 2 | 66 |
Brenda now has to make a decision about how many bagels and how much coffee to have for breakfast. She has $8 of income to spend on bagels and coffee. Bagels cost $2 each and coffee costs $2 per cup. Which of the following combinations provides Brenda with the highest total utility and is within her budget?
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Consumption Bundle | |||
---|---|---|---|
Quantity of Bagels | Quantity of Coffee (cups) | Total utility (utils) | |
0 | 0 | 0 | |
0 | 2 | 28 | |
0 | 4 | 40 | |
1 | 2 | 48 | |
1 | 3 | 54 | |
2 | 0 | 28 | |
2 | 2 | 56 | |
3 | 1 | 54 | |
3 | 2 | 62 | |
4 | 0 | 40 | |
4 | 2 | 66 |
The price of bagels increases to $4, but the price of coffee remains at $2 per cup. Which bundle is her optimal bundle assuming she still has $8 of income?
bagel(s)
cup(s) of coffee
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