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Worked Problems
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1
Suppose Maria's preferences for goods A and B can be described by the following marginal utility schedules. Both product A and product B cost $2; Maria has allocated $8 to the purchase of these two products.
Product AProduct B
Units of ProductMarginal UtilityMarginal Utility
First1218
Second1015
Third812
Fourth69
Fifth46
Sixth23


  1. How should Maria allocate her $8 between A and B so as to achieve maximum utility?
  2. Verify that the marginal utility per dollar of each good is the same at the utility maximizing bundle.
  3. Suppose the price of A falls to $1. By comparing the marginal utility per dollar of her current purchases of A and B, should Maria purchase more of good A, more B, or does her current bundle still maximize her utility?
  4. Assuming Maria still allocates $8 between the two goods, what amounts of goods A and B maximize her utility at these new prices?
  5. From the exercises above, list two price/quantity combinations that lie on Maria's demand curve for good A.






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