Name: Pacunayen, Irene A.

ABM 311(Introductory Microeconomic Theory)

EXERCISE # 6

1. Suppose the total utility schedule of Consumer A for fruit cakes is as follows:

Qty of fruit
Total Utility Marginal
cakes
(TU) Utility(MU)
0 0 0
1 7 7
2 13 6
3 18 5
4 22 4
5 25 3
6 27 2
7 28 1
8 28 0
9 27 -1
10 25 -2

a. Compute for the marginal utility for each level of consumption.(Fill Column 3)
b. Plot the Total utility and Marginal Utility curves and indicate the saturation point.
The total utility curve is downward-sloping curve, and the marginal utility decreases first till Qx =8 and
then decreases and becomes negative at Qx =9 and Qx=10. The saturation point is at Qx = 8, at this
point MUx = 0 and TUx starts to decrease.

2. 2. An individual’s marginal utility for two goods (Candy and Corn chips sre shown below:
Quantity MU candy MU chips MUca/Pca Much/Puch
1 16 15 8 7.5
2 14 13 7 6.5
3 11 12 5.5 6
4 10 8 5 4
5 9 6 4.5 3
6 8 5 4 2.5
7 7 4 3.5 2
8 6 3 3 1.5
9 5 2 2.5 1
10 3 1 1.5 0.5
 11 1 0 0.5 0

a. State mathematically the equilibrium condition for the individual, assuming that all his income
(P20.00 per unit of time, and both products can be bought for P2.00 each.
Consumer Equilibrium. A consumer is said to be in equilibrium if he is at a consumption level in which
there is no incentive for him to move(maximum satisfaction). This is at the combination of goods where:
MUx = MUy or using our example, or using our example, MUF = MUS
Px Py PF PS

Thus, three combinations satisfy the equi-marginal condition

10Qcorn + 11Qcandy , 4Qcorn + 6Qcandy and 8Qcorn + 10Qcandy

However, I = QxPx + QyPy must also be satisfied

Since I = QxPx +QyPy
Then,
10(2) + 11(2) = P42
4(2) + 6 (2) = P 20

8 (2) + 10 (2) = P 26 Consumer will be at his equilibrium condition by purchasing 8 units of

corn chips and 10 units of candy.

b. How many units of candies and corn chips should he purchase to maximize his utility.
10 units of conchips and 11units of candy.