ED5 to spend on any combination of flour and water
ED5 to spend on any combination of flour and water
Subject: Economics / General Economics
Question
Question
You have AED5 to spend on any combination of flour and water. The price of flour is AED2 and the price of water is AED1. You have calculated the following utility values for yourself:
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a) Complete the table
Quantity
Of flour
TU of flour
MU of flour
(MU/P)flour
Quantity of water
TU of water
MU of water
(MU/P)water
0
0
0
0
1
16
1
30
2
30
2
50
3
40
3
58
4
46
4
64
b) Conclude whether or not you follows the law of diminishing MU
c) What is your optimal combination of flour and water?
d) Draw the Total utility (TU) and Marginal Utility (MU) for Water and then conclude.
