Janet enjoys consuming both soda and coffee. Each can of soda costs PS = $1, and each cup of coffee costs PC= $2. Suppose that Janet buys 75 cans of soda and 50 cups of coffee per month. The following graphs show her marginal utility curves for soda and coffee. At her current consumption level, Janet's marginal utility from consuming the last can of soda she bought is MUS = 12 utils per can, and her marginal utility from consuming the last cup of coffee she bough is MUC = 12 utils per cup. 2 20 MU OF SODA (Utils per can) N 0 0 25 50 75 100 SODA (Cans per month) 125 150 (?) MU OF COFFEE (Utils per cup) 24 20 16 0 25 50 75 100 125 150 COFFEE (Cups per month) Is Janet currently maximizing her utility? No; she likes coffee and soda more than other goods, so she should buy more of both. Yes; the marginal utility she receives from her last can of soda equals that of her last cup of coffee. No: she could buy less coffee and more soda not cron
Janet enjoys consuming both soda and coffee. Each can of soda costs PS = $1, and each cup of coffee costs PC= $2. Suppose that Janet buys 75 cans of soda and 50 cups of coffee per month. The following graphs show her marginal utility curves for soda and coffee. At her current consumption level, Janet's marginal utility from consuming the last can of soda she bought is MUS = 12 utils per can, and her marginal utility from consuming the last cup of coffee she bough is MUC = 12 utils per cup. 2 20 MU OF SODA (Utils per can) N 0 0 25 50 75 100 SODA (Cans per month) 125 150 (?) MU OF COFFEE (Utils per cup) 24 20 16 0 25 50 75 100 125 150 COFFEE (Cups per month) Is Janet currently maximizing her utility? No; she likes coffee and soda more than other goods, so she should buy more of both. Yes; the marginal utility she receives from her last can of soda equals that of her last cup of coffee. No: she could buy less coffee and more soda not cron
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
Related questions
Question
Confused on the first problem and unsure if the rest I have is correct
Transcribed Image Text:Janet enjoys consuming both soda and coffee. Each can of soda costs PS = $1, and each cup of
coffee costs PC = $2 Suppose that Janet buys 75 cans of soda and 50 cups of coffee per month.
The following graphs show her marginal utility curves for soda and coffee. At her current
consumption level, Janet's marginal utility from consuming the last can of soda she bought is
MUS= 12 utils per can, and her marginal utility from consuming the last cup of coffee she bought
is MUC = 12
utils per cup.
MU OF SODA (Utils per can)
24
20
O
25
I
50
75
100
SODA (Cans per month)
Combination
A
B
C
D
125 150
@
Soda
(Cans per
Month)
100
75
125
25
MU OF COFFEE (Utils per cup)
MŲ
P
24
2:2
Is Janet currently maximizing her utility?
No; she likes coffee and soda more than other goods, so she should buy more of both.
Yes; the marginal utility she receives from her last can of soda equals that of her last cup
of coffee.
8
20
No; she could buy less coffee and more soda, not spend any more money, and be better
off.
12
4
20
16
No; she could buy more coffee and less soda, not spend any more money, and be better
off.
0
For each of the following combinations of soda and coffee, calculate the marginal utility per dollar
from the last can of soda and the last cup of coffee. Then, use the dropdown menus in the last
column to indicate which of the combinations satisfy the condition for consumer equilibrium.
25
50
75
100 125
COFFEE (Cups per month)
50
100
25
Coffee
(Cups per
Month)
100
150
MŲ
Pe
4
6
4
7
Consumer
Equilibrium?
False
False
True
False
Suppose Janet has a "caffeine budget" of $395 per month, which she spends on soda and coffee.
To maximize her utility, Janet will purchase 125 cans of soda and
100 cups of coffee per
month.
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