Question

# a) The table above shows Jessica’s marginal utility (MU)

from consuming two products: pretzels and Eskimo Bars.

(i) What is her total utility from purchasing three (3) Eskimo Bars?

(ii) Jessica’s weekly income is \$11, the price of a pretzel is \$2, and the price of an Eskimo Bar is \$1.

What combination of purchases will maximize Jessica’s utility if she spends her entire weekly

income on pretzels and Eskimo Bars?

(b) Assume that the price of wheat, an input for the production of pretzels, increases. Will Jessica’s

demand for pretzels increase, decrease, or not change?

Explain.

(c) Suppose that when the price of Eskimo Bars increases by 10 percent, Theresa buys 5 percent fewer Instructions: Answer the questions. Submit both the Excel Worksheet and your responses on
this word document for full credit.
Assume Jessica consumes both pretzels and Eskimo Bars.
Marginal
Marginal
Utility
Utility
Total
from
MU per
Quantity
Total
from
MU per
Quantity
Utility
Eskimo
Dollar
of
Utility
Pretzels
Dollar
of Eskimo
(Eskimo
Bars (in
(Eskimo
Pretzels
(Pretzels]
(in Utils)
(Pretzels)
Bars
Bars
Utils
Bars)
O
0
0
1
8
8
\$4.00
10
10
\$10.00
15
18
21
24
26
28
30
31
33
33

Economics