Micro 2.11 Utility Maximization

Watch Jacob Clifford’s Micro 2.11 Utility Maximization and answer the following questions.

The link is here:

https://www.youtube.com/watch?v=WglpOZOZyDI&feature=youtu.be

1. How do economists describe satisfaction?
2. Describe the shape of a total utility (TU) curve. Show it in a graph.
3. Describe the shape of marginal utility (MU) curve. Show it in a graph.
4. What is the mathematical formula for marginal utility?
5. What principle gives the total utility curve its shape?
6. Why does a marginal utility curve slope the way it does?
7. Explain why each unit of something that you consumed gives you less utility than the one before it.
8. Using the data below and your knowledge from Mr. Clifford’s video, answer the questions that follow this chart showing the marginal utility for goods A and B.

If a consumer has $12 to spend, and the Price of Good A is $4 and the Price of Good B is $1?

1. State the utility maximizing rule.
2. Set up the new columns in the chart and then determine how many units of Good A and how many units of Good B will the consumer buy? (2 points each column)
3. Explain how you determined the number purchased of A and B.
4. You are given the following information: The price of cake is $2 and the price of cookies is $1. Complete the missing information in the chart.
5. How many cakes and how many cookies will be bought with a budget of $10? Show your work. (1 point each column)