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# Andy purchases only two goods, apples (q1) and kumquats (q2) He has

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Andy purchases only two goods, apples (q1) and kumquats
(q2). He has an income of \$40 and can buy apples at \$2
per pound and kumquats at \$4 per pound. His utility
function is U(q1,q2)=3(q1)+ 5(q2). What is his marginal
utility for apples and what is his margina utility for
kumquats? What bundle of apples and kumquats should he
purchase to maximize his utility? Why?
Solution
Answer utility function is U(q1,q2)=3(q1)+ 5(q2)
Marginal utility derived from apple (q1) is = 3
Marginal utility derived from kumquats (q2) is = 5
Total utility derived from utility function is = 3*1 + 5*1 = 8
Cost incurred to derive utility of 8 = \$2+\$4 =\$6
Total budget = \$40
Utility derived upto \$36 = 8*\$6 = 48
Since we cant purchase both apple (q1) and kumquats (q2)
from \$4 so we will purchase apple (q1) because it is giving
more utility.
Utility derived from \$4 of apple = 3*2 ( two units of apple
will come from \$4) = 6
Total utility derived from \$40 = 48+6 = 54

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Andy purchases only two goods, apples (q1) and kumquats (q2). He has an income of \$40 and can buy apples at \$2 per pound and kumquats at \$4 per pound. His utility function is U(q1,q2)=3(q1)+ 5(q2). What is his marginal utility for apples and what is his margina utility for kumquats? What bundle of apples and kumquats should he purchase to maximize his utility? Why? Solution Answer utility function is U(q1,q2)=3(q1)+ 5(q2) Marginal utility derived from apple (q1) is = 3 Marginal utility derived from kumquats (q2) is = 5 Total utility derived from utility function is = 3*1 + 5*1 = 8 Cost incur ...
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