Marginal utility
Books or Movies
You are reviewing your monthly budget and determine you have $60.00 to spend on either books or movies each month. (Remember you must have whole numbers, not fractions) The books cost $8.00 and the movies cost $20.00. Put this into equation form.
Complete the following Total Utilities table.
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Order Paper Now| Books | |||
| Total Utility | Quantity | Marginal Utility | Marginal Utility Per $ |
| 50 | 1 | ||
| 80 | 2 | ||
| 100 | 3 | ||
| 110 | 4 | ||
| Movies | |||
| Total Utility | Quantity | Marginal Utility | Marginal Utility Per $ |
| 22 | 1 | ||
| 42 | 2 | ||
| 52 | 3 | ||
| 57 | 4 |
Using the equation created above, solve to locate four points and plot them on a budget constraint line. Create the graph in Excel and paste onto your Word document answering the questions below.
Write a one page response answering the following questions about your graph and tables:
- How many books and movies would maximize your level of satisfaction given the budget of $60.00?
- Are the charts above consistent with the Law of Diminishing Marginal Utility? Why or Why not?
- What is the consumer surplus of purchasing three books?
- If you were able to go to the matinee for movies at a price of $10.00 instead, how would this change the amount of books and movies you could purchase?
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