Suppose a Consumer Has the Utility Structure of Weekly Tea

question 297

Essay

Suppose a consumer has the utility structure of weekly tea and coffee consumption shown in the following table.
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$\begin{array}{|c|c|c|}\hline \text { Cup } & \begin{array}{c}\text { Marginal Utility } \\\text { of Tea }\end{array} & \begin{array}{c}\text { Marginal Utility } \\\text { of Coffee }\end{array} \\\hline 1 & 12 & 24 \\\hline 2 & 10 & 22 \\\hline 3 & 9 & 14 \\\hline 4 & 7 & 10 \\\hline 5 & 6 & 6 \\\hline 6 & 5 & 2 \\\hline\end{array}$ ​
If the price of a cup of tea is $1 and the price of a cup of coffee is $2, how many of each would the consumer purchase if the consumer had $10 to spend? What is the total utility level at the optimal consumption mix?

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Definitions:

Earnings Per Share

A measure of a company's profitability that calculates how much of the net income is available per share of stock.

Year 2

Refers to the second year of a particular time frame, often used in financial analysis to denote the second year of operations, investments, or accounting periods.

Price-Earnings Ratio

A valuation metric comparing the current share price of a company to its per-share earnings.

Year 2

A reference to the second year in a time series analysis or the second year of a company's operations or financial reporting.