- Submitted By: Madonna-Hicks
- Date Submitted: 04/13/2015 7:03 AM
- Category: Business
- Words: 278
- Page: 2

The following table displays George’s consumption of soda pop and pretzels. The price of each soda pop is $2.00 and the price of each pretzel is $5.00.

A. Fill in the missing total utility, marginal utility, and marginal utility/price (MU/Price). Place the final answer for each in the correct shaded area within the table below.

Bottles of Soda Pop

Number of Pretzels

Bottles of Soda Pop Consumed

Total Utility

Marginal Utility

MU/Price

Number of Pretzels Consumed

Total Utility

Marginal Utility

MU/Price

0

0

0

0

0

0

0

0

1

20

20

10

2

50

25

5

2

38

18

9

4

90

20

4

3

52

14

7

6

120

15

3

4

60

8

4

8

140

20

4

5

64

4

2

10

150

5

1

6

62

2

1

12

150

0

0

B. George has $28.00 to spend on soda pop and pretzels. Determine the number of cans of soda pop and pretzels that will be optimal for George. Explain your reasoning regarding how you chose that consumption point. Submitting only a final answer will not earn credit.

George's budget = $28.00.

Number of cans of soda pop and pretzels that will be optimal for

George = 4 soda cans + 4 pretzels.

In the above table, marginal utilities to prices are equal for

these combinations:

(1) 4 soda cans + 4 pretzels - (2) 5 soda cans + 8 pretzels

Expenditure incurred in the (1) combination is ( 4*2 + 4*5) = $28.00

Expenditure incurred in the (2) combination is ( 5*2 + 4*5) = $50.00

The expenditure that incurred in (1) combination matches his budget that is why this

combination will be optimal for George.