Economics P3 Questions/Doubts

[Azland]

Anyone who has a doubt or question..please post it here and well discuss it here.

I'll start off since this question has been on my mind.



2 The schedule shows the total utility derived by a consumer of a good X at different levels of
consumption.
quantity of X consumed 1    2   3   4    5   6   7
total utility (units)        30 50  65  75  80  83  84

The consumer obtains three units of utility from the last $ she spends on each good that she
purchases.
What is the maximum number of units of X that she will consume if the price of X is $5?
A 3
 B 4
C 5
D 6

Mark scheme says A. Does anyone know how?

[lastgift]

Hi Azland!

The equilibrium for a single-good is MUx=Px.
You know the price is $5, you will have to look for marginal utility which should be equal to 5.
When you consume 3 units, the marginal utility is 15 and as she obtains 3 units of utility, the MUx= 15/3= 5.
Thus, C.

[Azland]

the answer is A..but thanks anyway for the try ;p

[lastgift]

Yes if you examine my solution properly the answer is three units which is option A! Just read the option wrong dude.

[Dasith]

k its like this, this guy gets 3 units of utility /$ on each good(this means any other good in market)  she purchases.If the price of a single unit of good x was $5 then she gets:

@ 1 unit of x   : 30 units of utility for $ 5 spent
@ 2 units of x  : 20 units of extra utility $ 5 spent
@ 3 units of x  : 15 units of extra utility $ 5 spent

She wouldent purchase more than that because the utility falls below 15 units / $ 5, where she would buy another good(not good x) from the market which gives @ least 3 units of utility / $ spent.

[lastgift]

Isnt it a replica to what I explained Dasith?

[Dasith]

Isnt it a replica to what I explained Dasith?

yea replica with details

[Azland]

The table shows the figures for consumption, capital formation and depreciation in four
economies, all measured in US $.
Assuming that the state of technology remains unchanged, which economy is most likely to
experience economic growth?
consumption ($ m) capital formation($ m) depreciation
($ m)
A 100 20 10
B 500 200 200
C 1000 1200 1400
D 20000 5000 6000

Anyone knows how to solve this question? . If so, please explain.

[Dasith]

^ is da ans A) in the above post ?

its because all the other economies hav a way too higher depreciation than their capital formation , which means their capital in current year would depreciate causing them difficulties in producing the same amount of goods they produced this year , in the next year , which means they are unlikely to hav economic growth , but in A) the Depreciation < than Capital formation , which allows them to produce more goods next year....

[Azland]

Yes, Answer is A. I got your point so the table listing consumption has no significance?

[Dasith]

Yes, Answer is A. I got your point so the table listing consumption has no significance?

yea u cud say dat ..

[Tohru Kyo Sohma]

Hello everyone
I didn't come here for long.
i started practicing economics P3 and its really hard
i'll just post my doubts!
please try helping me out someone:D
oct/nov 2002:- Qns 2,3,5,6,7,9,11,12,14,18 and 27
oct/nov 2003:- Qns 1,2,4,5,7,8,9,10,11,12,15,16,17,19,20,21,24,27,28 and 30
oct/nov 2004:- Qns 1,5,6,8,9,10,12,24,25,27,28,29 an 30
PLEASE HELP ME OUT:'(

[Azland]

long list . Would be helpfull if you could copy paste the questions here.

[Tohru Kyo Sohma]

The table shows the marginal utility that a consumer obtains from consuming successive units of
good X.
             Quantity of units                 MU of units
                    1                                       10
                    2                                       18
                    3                                       24
                    4                                       28
                    5                                       30
                    6                                       31
The price of good X is $4.
What additional information is needed to determine the quantity of X that the consumer will
purchase?
A the consumer’s income elasticity of demand for good X
B the consumer’s price elasticity of demand for good X
C the marginal utility of money to the consumer
D the marginal utility that the consumer obtains from substitute goods
price output
i said A but the answer is C
can anyone explain why?

[Azland]

Equi-marginal principle Mux = Px

Marginal utility of good X = Price of good X.

In words a consumer will continue to purchase a good untill the utility he gains from the last purchase is equal to or higher than his value of money. Note..the marginal utility of money is assumed constant for this assumption..it does not reduce with more or lesser purchases of any good.

Your question shows the marginal utility he gets from each good and so the only information left is the value of money(Px). Elasticity has pretty much nothing to do with these type of questions so you can cross of a,b,d completly.