Lance Francis narrative of micro economics Essay examples

Submitted By lfranci2
Words: 365
Pages: 2

Lance Francis
March 10, 2013
Micro Economics

The five different goods that were included in this project are cola, pretzels, nuts, pizza, and chips. The given income that we were limited by was $106. The prices of the goods were cola $18, pretzels $4, nuts $6, pizza $24, and chips which was $1. Primarily what I did was find the marginal utility for each individual good. The equation that I used to find the marginal utility was change in total utility/ change in quantity. I check my answer by making sure that every number was decreased. This is because of the Law of Diminishing Marginal Utilities.
After finding the marginal utility, I had to maximize the utility. The equation that I used to maximize my utility was Marginal utility/Price. The numbers in my table also decreased as the quantity increased (quantity and max utility are inversely proportional).
Following the two tables of marginal utility and maximized utility, I purchased the good with the highest maximized utility. The rule is that the rational consumer is to purchase the good with the highest maximized utility first, and in a decreasing fashion. I purchased the chips first since it had the highest max utility of 5. In this particular situation, after purchasing the chips, my maximized utility for cola, chips, and nuts were the same; therefore, it did not matter which good I purchased second. My purchase schedule is as followed: 1)chips, 2)cola, 3)nuts, 4)chips, 5)pretzels, 6)cola, 7)pretzels,