Assume Pat spends all of her $ on 4 apples & 4 candy bars. Her MU of the 4th apple is 20 utils, and her MU of the 4th candy bar is 40 utils. If an apple costs $1.00 and a candy bar $0.50, to maximize utility Pat should:

CONSUMERS

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	Purchase more of both goods
B	Maintain the current purchase of 4 of each
C	Buy more apples and fewer candy bars
D	Buy fewer apples and more candy bars

Explanation:

Detailed explanation-1: -Assumptions of Marginal Utility Analysis This theory states that utility is a cardinal concept. In other words, it is measurable and quantifiable. Hence, you can say that you derive a utility of 10 units from consuming 1 unit of commodity A and 5 from consuming 1 unit of commodity B.

Detailed explanation-2: -Positive marginal utility occurs when the consumption of an additional item increases the total utility. On the other hand, negative marginal utility occurs when the consumption of one more unit decreases the overall utility.

Detailed explanation-3: -Consumer choice theory is based on the assumption that the consumer fully understands his or her own preferences, allowing for a simple but accurate comparison between any two bundles of good presented.

Detailed explanation-4: -For example, the marginal utility between one soda and three sodas is 1.5. This is calculated by subtracting the total utility of three sodas (seven) by the total utility of one soda (four) and dividing it by the change in units (two).

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

CONSUMERS