A consumer has 8 units of money to spend on apples and oranges. Construct a schedule to show his equilibrium position. What is the maximum utility that he can get from this units? ( MU of 1 unit = 12 utils)
Given:
Money = Rs 8
MUm = 12 utils
Let the price of Apples be Rs 1 and price of oranges be Rs 1
Equilibrium is struck when:
So, equilibrium is struck when consumer purchases 5 units of apples (spending Rs 5) and 3 units of oranges (spending Rs 3).
The maximum utility that he can get from these units are 194 utils (30 + 28 + 25 + 20 + 12 + 35 + 32 + 12).
Money = Rs 8
MUm = 12 utils
Let the price of Apples be Rs 1 and price of oranges be Rs 1
Units of Apples (units) |
MUA (utils) |
Units of Oranges (units) |
MUO (utils) |
1 2 3 4 5 6 7 |
30 28 25 20 12 2 – 5 |
1 2 3 4 5 6 7 |
35 32 12 10 8 3 – 1 |
Equilibrium is struck when:
So, equilibrium is struck when consumer purchases 5 units of apples (spending Rs 5) and 3 units of oranges (spending Rs 3).
The maximum utility that he can get from these units are 194 utils (30 + 28 + 25 + 20 + 12 + 35 + 32 + 12).