# ES2550 Microeconomics

## ES2550 Microeconomics

﻿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.