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Economics Question

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  • 17-09-2012 10:25pm
    #1
    Anyusername
    Closed Accounts Posts: 100 ✭✭


    Hi guys,


    Studying economics on my own and was wondering if someone could help me out with these 2. Prob simple but not sure about them.:o




    The table below illustrates the law of diminishing 
    marginal utility. Complete the table and state the point after which diminishing marginal utility sets in and explain your reasoning.

    No of units consumed 1.         2.        3.        4.       5.    6
    Total utility in units.   20.   45.    65.     80.   90. 95
    Margin utility in units.   0





    Suppose a person has €5 to spend on two goods: tea and biscuits, both costing €1 each. The marginal utility derived from both of these goods is shown in the table below.


    Unit of goods.   Mu of tea.   Mu of bis 
    1.                           10.                 12
    2.                            8.                  10
    3.                             6.                   8
    4.                            4.                    6
    5.                            1.                     3   
    Total utility = 29 utils.    Total utils =39

    How did they come up with figures in this one?
    I understand they just added up the figures for the total utils.




    Thanks so much for any help. :)


Comments

  • Options
    #2
    keano89
    Registered Users Posts: 72 ✭✭keano89


    Anyusername wrote: »
    Hi guys,


    Studying economics on my own and was wondering if someone could help me out with these 2. Prob simple but not sure about them.:o




    The table below illustrates the law of diminishing 
    marginal utility. Complete the table and state the point after which diminishing marginal utility sets in and explain your reasoning.

    No of units consumed 1.         2.        3.        4.       5.    6
    Total utility in units.  20.   45.    65.     80.   90. 95
    Margin utility in units. 20 25 20 15 10 5

    So after 2 units the utility starts to diminish. They receive a utility of 20 for the first unit, they receive an additional 25 for the second unit, but they only receive an additional 20 for the third. The utility they receive is starting to decrease. Imagine the units are slices of cake, you receive a utility of 20 for the first slice, an additional 25 for the second but only 20 for the third as you are starting to fill up and only an extra 15 utility for the fourth.


    Suppose a person has €5 to spend on two goods: tea and biscuits, both costing €1 each. The marginal utility derived from both of these goods is shown in the table below.


    Unit of goods.   Mu of tea.   Mu of bis 
    1.                           10.                 12
    2.                            8.                  10
    3.                             6.                   8
    4.                            4.                    6
    5.                            1.                     3   
    Total utility = 29 utils.    Total utils =39

    How did they come up with figures in this one?
    I understand they just added up the figures for the total utils.




    Thanks so much for any help. :)

    Hope this helps


  • Options
    #3
    dmc17
    Registered Users Posts: 3,728 ✭✭✭dmc17


    Anyusername wrote: »
    How did they come up with figures in this one?
    I understand they just added up the figures for the total utils.

    Cups of tea consumed 1. 2. 3. 4. 5.
    Total utility in units. 10 18 24 28 29
    Margin utility in units. 10 8 6 4 1


    Biscuits consumed 1. 2. 3. 4. 5.
    Total utility in units. 12 22 20 36 39
    Margin utility in units. 12 10 8 6 3

    I assume these figures are just made up like in the first example. Your first cup of tea gives you 10 units but your first biscuit gives you 12 units.
    I'd imagine it would depend on whether you prefer tea or biscuits :)


  • Options
    #4
    Anyusername
    Closed Accounts Posts: 100 ✭✭Anyusername


    keano89 wrote: »
    Hope this helps

    Thanks so much. That's brill:)


  • Options
    #5
    billyknowsbest
    Registered Users Posts: 30 ✭billyknowsbest


    Another economics question!!
    Can anybody explain the Optimal Tariiff Argument as a form of protectionism? My textbook example is as clear as mud! Just looking for a simple explanation and then a simple example with aa few numbers; simple being the key word here! Cheers


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